Sure i agree. If engineers were allowed free reign then you'd end up with lots of complicated & over-priced widgets that appeal to an engineer but not many others - just like when Homer Simpson designed a car.
VW could make much better engines than what they do but there'd be a cost (not just $$). Then again, so could Ford, Holden, Honda, Toyota, etc.
I'd suggest you have a good look at the turbo-diesels you own & compare them to diesels of 20 years back. The power, torque & overall powerband are pretty outrageous now compared to the older stuff. Did these "high powered, overstressed" diesels give you any trouble?
Just as comparison, a 103tsi is 74kw/litre ex-factory. My 1.8tsi is 66kw/litre ex-factory & 75kw/L mapped (83kw/L if you believe the tuning company). I fully expect to drive it to 300,000km without issues.
There are plenty of Golf R daily drivers out there running 95kw/L without issues.
I just see the little engine with reasonable power is a potential grenade argument as being a bit of a falacy. to be honest, I doubt I could go back to an N/A engine.