I don't think they had an issue with design so much as only having a single team as bottleneck for the entire product lineup. They really need the equivalent of Intel's tick-tock strategy where the designers can be going full speed on the cool new manufacturing techniques but a second team is just taking last year's industrial designs and shipping updates with current spec / capacity components so they stop drifting so far behind the market every time the design team isn't ready to ship a major change.

The hardware has mostly stalled out. A great CPU from 3 years ago is still more powerful than what most people are buying today. RAM and SSD space is plentiful enough to be a non issue for most people. Battery progress is steady but very slow. So, what's left to base a new laptop on GPU?

Storage? Nearly everyone I know who has a MBP is 100% on it all the time on disk. Understand apple makes a load on the SSD upgrades, but seriously increasing base storage would be enough for a bit.

Is 1TB not large enough, or is it a cost issue?

Sure, they IMO should increase the minimum past 128, but many people don't use close to that and the 1,300$ price point is attractive w/ 2.7GHz i5.

They could go the desktop CPU route, although that's likely not an option for Apple since that would require them to either use extreme throttling or beef up the cooling (meaning louder fans and probably a thicker case)