Wouldn't repeated block size increases lock out "normal people" from participating too? Hosting a local BTC node is already hard, and completely impractical on a mobile device.

If I'm not mistaken, you don't need to host a full node to access and operate BTC network. But hosting full nodes certainly adds resilience and speed to the system.

Point 1. Increasing node storage size would not be very expensive, people are buying NAS storage for fun, some of the more idealistic ones would certainly do that for BTC. BTC chain today is less than one terabyte. Even increasing chain size x10 times would still mean that it would fit on a single cheap consumer HDD. Increasing it x100 times would require something like a 6-8 HDD stripe, under 1-2 thousand bucks in price. People do that for memes or hosting torrents every day, all across the globe.

Point 2. Increasing chain size by a lot would mean that the amount of full nodes would inevitably drop, lets say by half, or even by 3/4. Still a lot would remain and the system would be very decentralized. While with lightning crutch the decentralized part is clogged permanently and is unusable for any serious currency replacement use, while users are forced on a broken by design centralized Lightning.

In my opinion the answer is obvious, if we want to have a truly decentralized currency, and not some casino replacement for gambling and law avoidance.

Nope, because SSD/HDD tech has evolved in capacity while the costs have gone down.