[edit] On My phone "System" is listed as 11 GB, other google apps add up to another couple GB, and my music collection is 14GB so out-of-the-box I could see me having just 5GB free with no other apps.
It makes specific points to say that it is meant for those who don't want the phone to be a distraction. I don't recall the camera specs, but I can't imagine it's good by 2020 standards. Music, sure - it seems like the right size for a good MP3 player (remember that term, kids?)
I like the idea of a palm phone. Part of me thinks about getting a phone like it, and then a Oneplus 7T phablet, and swapping the SIM like you would swap a watch for different occasions.
Actually, depending on the response time and the reliability of getting SMS and calls post-swap, that sounds tempting...
I own a sansa clip plus. It has a 32GB microSD card in it. An out-of-the-box storage of about 20GB would make the Palm phone a downgrade from my MP3 player.
Do you have a source for that? It seems like many of the times Apple upgrades their chip, they advertise greater power efficiency. E.g. for the A13 (from Wikipedia):
> Apple claims the two high performance cores are 20% faster with 30% reduction in power consumption, and the four high efficiency cores are 20% faster with a 40% reduction in power when compared to the A12.
Similarly the A12:
> It has two high-performance cores which are claimed to be 15% faster and 50% more energy-efficient than the Apple A11
And A8:
> Apple states that it has 25% more CPU performance and 50% more graphics performance while drawing only 50% of the power of its predecessor, the Apple A7.
I've searched the web and can't seem to find any source that actually specifies power consumption of Apple's chips by generation, stretching from the A6 to A13.
So for all I know, the 11's CPU with the 5's battery might be far better, not far worse. It doesn't seem like any kind of law that newer processors use more energy. So only actual data will give an answer.
Not the original poster but the iPhone 5 had a 1440 mAh battery while the iPhone 11 has more than double that with a 3110 mAh battery. For comparison, iPhone 5 was rated at 10 hours video playback while the iPhone 11 is rated at 17. So ballpark guess, that hybrid version would have ~8 hours video playback compared to the iPhone 5's 10.
Rough numbers all around, especially since battery usage is largely driven by the display, RAM, and CPU.
But I know the reason here is tackle low cost and leveraging what you stated is what gets it there. So I do get it ...
Of course, judging by most of the comments, the users are completely happy with this. Some are throwing money on their monitors despite saying it is a compromise. So you are right that a different device is/was quite unlikely.
The new SE requires very little new manufacturing capacity. The case and probably battery are from the iPhone 8; the CPU/GPU/SOC and most of the rest of the electronics are from the iPhone 11; the camera still seems to be a slightly unknown quantity but the specs suggest it has a lot in common with the iPhone X camera. No doubt a certain amount of tricky engineering was required to put those parts together efficiently, but the SE requires almost no new manufacturing capacity beyond the final assembly line. For Apple it's pretty much a no-brainer.
A hypothetical "iPhone Classic", with modern innards in an iPhone 4/5 form factor case, would be a very different matter. You couldn't combine the 11's CPU with the 5's battery - battery life would be laughable. So you'd need to use a CPU from an earlier model; I suspect you'd have to go back at least to the 8 to find a CPU that doesn't drain an iPhone 5 size battery like water through a sieve. That means keeping one more CPU fabrication line in business beyond its intended life, taking that capacity away from the plants that are making silicon for the iPhone 11 and the coming 12. The camera would of course also have to be based on an earlier model, with all the same downsides again in terms of keeping old technology going and taking up factory capacity. And fitting all that into a 4/5 case would still be a much bigger engineering feat than the actual SE 2.
Bottom line: Even if you assume that the "iPhone Classic" market would be as big as that for the SE 2, it's hard to see how it would be worth Apple's time and money to cater to it. If you want to argue that the Classic would be a practical proposition for Apple, you would have to claim that the Classic market would be much bigger than the SE 2 - and given how popular the SE 2 is already turning out to be, that seems really unlikely.