It can do less but won't cause your browser stability, performance and other issues. Nor will writing them require reading the Firefox source code. XUL extensions routinely hijacked random internal Firefox functions which is why many had issues being installed together. Then all of it was executed in a single context (which is why they could hijack those functions to begin with) along with the UI and web page Javascript.

Those are all things they could have fixed incrementially, over time, but chose not to.

The end result would have been the same: broken backwards compatibility. The fundamental design of the original extensions was incompatible with a modern browser model (APIs only rather than hacking internal functions, separate contexts for everything, multiple processes, etc.). They chose to do it one go rather than piecemeal. So rather than having to check every version if some functionality your extension depends on is being removed you had to rewrite it once (well twice which was a mistake on their part).

It would have been gradual, and under most circumstances fixable with a bit of refactoring. Ripping the entire platform out from under people would not have produced the same result.

In the end the people who are most knowledgeable and most involved decided a gradual change was not feasible. Armchair quarterbacking them, without very specific and detailed arguments, just feels like the Dunning–Kruger effect in action.

Superior, as in defines a standard API. A clear API means the browser maker is free to change the internals of the browser, without worrying about changing something that some extension relies on.