That is incorrect. There are several IoT products with manual fallback options on the market. I don't even know why you're disagreeing to be honest. You don't like IoT devices, I got that part.
Name three.
Also, "manual fallback" is a cop-out. When I want manual operations, I don't go looking for home automation. The "smart" features should be available without Internet. There's nothing technically difficult about this, but it isn't being done because of abusive business practices.
That is a good question. I don't know. But I'd say it became a selling point after the internet became ubiquitous and reliable enough in the eyes of consumers. Otherwise people would be complaining about 'needs internet access to watch a movie/make a video call/play a game/push source code/order food/call a taxi/etc/etc/etc".
Certainly I could (or at least someone with the engineering skills could), but the actual IoT companies don't. My impression of IoT devices (do not want) is based on what actually exists, not on what could theoretically exist.