But how, specifically? The examples you did give of improvements better hardware could bring - higher resolution, better textures, foliage, fog and cloud effects - are all things that they could easily upgrade for a cross-gen game without needing to make it next-gen exclusive, thereby excluding the 100m+ current Switch owners and dramatically lowering their potential sales.
Games tend to be pretty scalable. Until the scope of your ambition vastly exceeds your hardware's capabilities, there isn't much difference in developing a game from the ground up for more modern hardware, or developing with older hardware in mind and with improvements for the modern hardware.
There are exceptions, of course. As the other poster pointed out, Prime Remastered would likely not look as good or run as well if it had much larger environments. So you could make the argument that this is drawback of developing on Switch, but I personally would argue that large, open environments would not suit the game so well. Another major advantage of modern hardware (specifcally XBO -> XSX and PS4 -> PS5) is that high speed SSDs greatly reduce load times and allow tricks like what we saw in Ratchet & Clank and Spider-Man 2, with new environments loaded essentially instantaneously giving a "portal"-like effect, but this is not an advantage the Switch 2 would have.