I honestly don't bother with trying to explain what an "instance" is to people interested in leaving Reddit. I just say "get the app" since most users are on their phones anyway. The only time a new user needs to know about any decentralized/federation stuff is if they're using a web browser, where, yeah, it can be confusing. But apps hide all federation stuff. Just download it, make an account, and follow communities (or people in Mastodon's case).
Also thank you for sharing your perspective as a newbie in this community it's very helpful!
Your points are all correct, but I feel it's also important to remember that nobody owns and operates "Lemmy". It's entirely volunteer operated and while it has two full-time devs, they're paid by donations (and not very much). There is no budget or UX/UI department to do A/B onboarding testing or anything.
What I'm saying is that if there is something you feel needs changing nobody would stop you (in fact they would welcome you!) from rolling up your sleeves and trying to address it (like @[email protected] is doing with this community)!