I agree that multi-user should go away for modern server workloads, however, users are used as a blast door. Mainly because Linux's security model is lacking. systemd for example commonly runs services under separate users to make it more difficult for a compromised application to elevate privileges. Android does something similar AFAIK.
Users should have never became a security boundary to isolate applications, but they unfortunately have, and there's not really an alternative.
This is why I think multitenancy is the more important problem (though both are related), because it's the key to solving shared-kernel application permissions without "users". Containers were a step in the right direction but aren't a sufficient security boundary in themselves - what is currently handled by the "container runtime"/sandbox needs to be built into the kernel IMO.
Linux's security model doesn't become better just because everybody is doing it that way, and besides that, everybody is doing it because they are copying Linux.
Nah, its been lacking since inception, with people trying things like chroot jails and suid bits decades before Linux was a twinkle in an eye, and we still regularly fail at running untrusted code.
Users should have never became a security boundary to isolate applications, but they unfortunately have, and there's not really an alternative.