Why, oh why, is there not a smartphone – or even a similar form-factor device without the ability to phone – that lets its user run anything they want (say, a normal Linux distro)? And then you emulate Android whenever you need something that only runs on that?

Hell, I don't care if it's a generation or two behind smartphones. I don't understand why this doesn't exist when non-bleeding-edge hardware has become so mind-bogglingly cheap!

What am I missing?

Looks like this one does just that, android VM ontop linux:

https://furilabs.com/shop/flx1/

There is such a smartphone. But then you can't use your bank's app because it uses hardware attestation to ban alternative operating systems, and most banks require the app for 2FA or don't have a functional web portal at all. It's going to be even worse once governments roll out age verification apps that use hardware attestation.

https://pine64.org/devices/pinephone/