The base-tier chips are designed as high-volume tablet chips first and foremost, with ultramobility crossover capability.
Using DisplayLink or certain kinds of thunderbolt multimonitor are possible while running outside the pixel pipe or running multiple monitors on a single pixel pipe (this is not MST which is multiple pixel pipes on a single stream). But yeah it's ugly especially on a base-tier processor with this eating cycles/dumping heat. You're running the hardware encoder at least.
Discord had this weird error if you tried to enable the screen/audio capture, it tries to launch something and fails and the solution is you need to manually install "airfoil" because it's an audio capture module that discord licensed. you don't have to fully install it but the audio driver is the part that discord uses and that goes first (has to be allowed as a kext, ie non-secure mode). theoretically a kernel-level capture like that could be a ton faster than userland, I think that's the on-label use of airfoil.
And to not support industry standard NVIDIA GPU on ARM Macs, too. 1 GPU typically supports 5 output over as little bandwidth as PCIe x1.
AMD is 6 displays. You see this rarely on consumer boards but the ASRock 5700 XT Taichi for some inexplicable reason did expose all six -- with four DisplayPorts to boot, too. I do not think there has been 4 DP or six output customer cards since.
On the MacBook Air one output is connected to the internal display leaving one output for an external display.
(The Mac Mini that uses the same SoC is limited to 2 external displays for the same reason)
To support more displays they would have to add support for a second Thunderbolt bus to the base SoC.