The point of the cost is that it's cheap but non-zero. It makes spam uneconomical, creates pseudonyms for accruing reputation and makes it trivial to moderate (IDs are permanent).
Applications built on the platform can take advantage of this ID system and none of them need to rebuild auth or handle networking across the web. This means application devs can just focus on their apps and distribution is trivial.
The modern web is a nightmare of complexity for people trying to build applications, you basically need to raise VC and have a SaaS in order to be able to hire the armies of people required to build anything.
And it's identity management is based to Ethereum, so maybe just attach "Sign-in with Ethereum" component to the Mastodon instance, and you get something with same featureset as Urbit, but somewhat simpler and vastly more supportable. And as an extra, you get nice features like multi-machine scaling and live encrypted backups.
You can have simplicity with the proper abstractions and design to get there over time then you can fix it bit by bit. This is the only way a massive rewrite of the stack like this has any hope of success.
Mastodon is mostly a twitter clone - with a lot of effort you could probably tie server creation to eth IDs and resolve that bit at least (make it easier to spin up servers), but you don't solve the issue with updating servers to match versions and the fall out from all of that other stuff. You also don't solve application creation or distribution. Urbit's OS is designed as a deterministic function of its inputs - this is necessary to make it trivial to run/update the nodes. It's more than there being no distinction between users and nodes (though that's a big part).
I'd bet against any other federated system long term. Urbit is still a long shot, but if it wins - it wins big.
You haven't seen Gnutella in its glory days.