Why doesn't the government split the megacorp into several tiny companies? All this collusion between these otherwise unrelated companies is only good for Google.

Because breaking companies up seems to be more theatre and less useful outcomes. People call for it freely and usually don't have a theory of how it will actually help. And nobody seems to bring up evidence from past corporate breakups beyond "we did it ergo it was good" (which is suspicious logic).

On paper it looks something like a choice between one company with one shareholder or two companies with ... the same shareholder. It isn't clear what has really changed; the company was only ever a legal fiction anyway. If there were incentives to collude then they haven't gone away.

People always say this but what is the practical way this would come into effect? Unless the intention is to simply kill either YouTube or Google, or both, how do you separate out YouTube in a way that is meaningfully "breaking up" with Google but that the separate entity could afford?

There already was a time when Youtube was its own company. Google bought it. Maybe they didn't do great on their own but it was also ~2005 and things are very different now.

Yes but before Google bought it, it was a money incinerator.