You still have limited bandwidth and latency. Just because you break the distance up into smaller hops, the total distance to travel remains the same. Maybe scientists should focus on increasing the speed of light. LEOs also have short orbital lifetimes meaning the constellation needs to constantly be refreshed which isn't cheap.
The total distance to travel going via GSO or LEO is not at all the same; in particular, there's a fairly wide range of positions that an LEO satellite can be in where it has LOS to both Hawaii and the mainland.
That being said, once you've laid the cable, fiber optic is fast, they typically over-provide the cables when they lay them, and they can often increase capacity by improvements at the endpoints. Radio to LEO seems unlikely to compete with that, but for less-populous and/or poorer islands it might make sense.
I think SpaceX proposed system will be in LEO ~1100km above the earth. At this distance, satellite internet should be faster due to having a straight line, and the fact that EM in a vacuum is faster than fiber.
