.io are indeed "expensive", but to add one datapoint to your question: there's a concept/genre called "io games", mostly involving browser-based multiplayer games like this one (e.g. Agar.io, Krunker.io, and many others. a quick search leads to several lists of those; some of them don't use an .io domain, but lots of them do). That's probably another reason why, besides the "cool factor"?

I've read that .xyz domains (specifically email from .xyz domains) are blocked by default by some email providers because there has been so much spam from those domains historically (perhaps due to the price).

correct, spammers bought them when they were heavily discounted and attached negative brand association to them.

plenty of other options without baggage out there nowadays.

One less character and familiarity.

It sounds cooler

Problem I have with .io is that .com is more familiar with 1/3 the cost.

.io still seems sort of reasonable, try a .jp domain :P

Check .pr

You’ll see why barely anyone in Puerto Rico uses them

Instead we use examplepr.con