The fact that you can't swap dollars transactionally without trusting an escrow provider or the person you're doing the swap with is a failing of dollars. It's not a failing of e.g. ethereum where you absolutely can set up a smart contract that will do that. Trying to use that as an argument against cryptocurrencies is misguided, and if things go well for cryptocurrency and there's a proliferation of CBDCs or more ways to earn income by being paid in cryptocurrency, it will become irrelevant.

These defi systems do indeed exist and are used by quite a few people (including occasionally me). 'Why are so many still keeping their money on [centralised] exchanges', is a question that a lot of people in the cryptocurrency ecosystem ask themselves despairingly. While UX could be better, it's really not that bad - the real answer is that the vast majority of people investing are 'number go up' investors, used to the stockmarket, rather than people who actually care about the core ideas of decentralisation, programmable money, etc.

Your trust point is valid but needs tweaking: You need to trust someone with your money if you want to buy at an exchange. Although exchanges are the most convenient way to right now, they are not the only way. Peer-to-peer is always an option; you can trade with someone directly, or even do work and get paid directly in e.g. Ethereum.

But even if exchanges were the only way, that trust time is quite minimized, compared to the status quo.

To your second point, I agree it has to do with convenience. IMO the main reason is crypto UX is still very bad. The space is going to need some major new hardware and software solutions before going anywhere near mainstream.