The short version of the article is "don't outsource your core competency" and that very much holds true today.
Factorio or The Witness might be better examples of games that did/are doing novel, exceptional things and their engines were developed in-house. And it shows. The unique look and feel, the smoothness, depth, coherency etc.
The comparison is maybe unfair though. We're basically comparing a product focus with an art focus. Artists _must_ do things their way. Risk and cost are secondary. Success is a bonus. In a more survival oriented world you have to weigh these things differently.
What you describe above seems more like a problem with clinging to legacy and missing the world around them rather than developing things in-house. It should be obvious, but the thing you do in-house has to provide you unique advantages over the main-stream. That comes with costs and only works if you have the stomach to be honest with yourself.
I dont think The Witness really required a custom engine, except that Mr. Blow had a team that could (and it might've been easier for them). Ditto with factorio tbh.
If a game like https://en.wikipedia.org/wiki/Antichamber could be done in unreal engine, most other games could've been done with it. The fact is, understanding the engine is harder than writing your own, and for some programmers, they'd rather write their own simply because they won't have to read someone else's code.
On the one hand, there was no attempt to generate your DB code. OTOH, since you had to write it yourself, it was easy to tune.
100% agree with this take re: gaming, but his overall point -- if your value-add in the marketplace is X, you'd probably better build your own X -- is more true than not. Games blur that, but at the end of the day nobody buys games PURELY for the 3D side of things. They're looking for story and gameplay at least as much, and (for me at least) probably MORE than technical beauty.
Frankly, I think the article, like a lot of Joel Spolsky's writing, has aged like milk. For example:
Except, if you look at modern games, even ones with very high performance effects, that's not what they do. They use one of a rather small number of 3D engines, like Unreal or Frostbite. It turns out that developing cool 3D effects is far easier if you have a battle-tested performance optimized framework helping you. CD Projeckt Red abandoned its own in-house engine (REDengine) in favor Unreal 5 for future development, in no small part due to the issues that they ran into trying to extend that engine for a massive open-world game like Cyberpunk 2077.