You are right, code density is perhaps not that critical today.
And it is difficult to quantify its relevance as code density is always related to other variables such as instruction expressiveness, numbers of uop emitted, etc.
But I still think that code density is important for RISC-V. Because RISC-V philosophy to reach high performance is to use very simple instructions that can be combined together and take advantage of macro-op fusion. I think RISC-V without macro-op fusion can't reach the performance of other ISA.
But RISC-V with all these simple and not very expressive instructions and without C extension has a pretty bad code density which could cost a lot because it is not at the competitors' level.
So if we think of RISC-V as a macro-op fusion oriented ISA, then the C extension becomes important to be competitive.
I don't know what is better between a "macro-fusion" oriented arch or a "complex-instruction" oriented arch, future will tell us.
If there is lots of evidence for the performance benefits of improved density vs the alternative of fixed instruction width in real world CPUs then I’m sure you’ll be able to cite it.
ARMv8 and ARMv9 have poor code density. These cache are large as a workaround to that.
This isn't free, as besides making the die larger (and thus lower yields), the L1's clock speed is limited due to its size.
From a performance perspective what is the evidence that this actually provides an advantage?