Wouldn't a potato setting also look like absolute ass? I mean few games are very pretty at 1080p Low which OP thinks isnt going low enough to accommodate old hardware. In those situations FSR can be used to make it run at 60 FPS with 1080p output but yes it will for sure not be a pretty experience, but it will run and won't destroy gameplay mechanics.

Now I do believe that the absolute best would be if developers got better at building their games and graphics engines to be resource efficient or "optimized" as the gaming community likes to call it. But that's quite an ask in reality as most studios don't build their own engine and those that do generally aren't building them with resource efficiency in mind, they're focused on what kind of games they want to build with them. Id Software really stands out but they're engine making wizards almost more so than game developers and really pride themselves with making good looking games that can be run well by just about anything. Doom Eternal runs and looks ridiculously well on the Steam Deck (in regards to what little juice that machine has) as an example.

I'm being awfully apologetic of developers here, but I really don't think the issue is that you can't run the games on older hardware, because FSR has mostly solved that imo.