Yes, older games had to be designed with hardware limitations in mind. No, that doesn't mean you should carte blanche upend deliberate artstyle choices from them because modern devices are more powerful, and arbitrarily say that actually what they used to do was not deliberate or something worth having done.
I think I gave a pretty good example of what happens when you adhere so strictly to using miniaturized models just because the original game used mini overworld sprites everywhere, you end up using them in an inappropriate context. The impact of the Cyrus cutscene is lessened. Black and White is another example where the overworld models are miniaturized - but the Xtransreceiver calls, in battle models, cutscene models, etc. are all full sized humans. I also gave ORAS as an example. It's 3D, it uses miniaturized models, but cutscenes play out with full sized models. There's an appropriate implementation of this artstyle. It's clear to the player that the miniaturization is a representation of a larger world and not the world itself.
My desire for full sized models in Pokemon is not because I believe in completely upending artstyle designs from the past. An example is Link's Awakening Switch. It's a very deliberate decision to adhere to the proportions of the GB game to preserve the 2D level design and combat since all of that is very dependent on the precise relationship of tiles and sprites in a grid. And they leveraged that chibi design to emphasize a dreamlike diorama feel where everything is miniaturized on purpose. It also mimics the photographs from Link's Awakening DX. But the non-dream world - the intro and the credits - are in the normal proporionate LttP style.
But this sort of preservation of sprite based game design is not 100% necessary for Pokemon since Let's Go is effectively a 1:1 remake of GB Kanto but uses the same more realistically proportionate humans everywhere. It is a deliberate art style choice to make them a little bit squatter and cuter than the normal models but they are still closer to how ORAS did it than BDSP.
I'm not really sure how Wind Waker fits into this. WW and TP exist on the same console, so realistically proportionate character models are possible on the hardware. Wind Waker also doesn't show two different representations of character proportions throughout gameplay - it's not a 2D RPG that shows different overworld and battle sprites. I'm not even sure how this is relevant when I gave Gens VI and VII as examples of what I would prefer to see, those are still very cartoony games. Gens VI and VII share the exact same hardware limitations but they moved on to full sized models in Alola.
If BDSP used chibi models but switched to full sized models in certain cutscenes then I would have less of a problem with it. However, I still would prefer full sized models in the overworld, because I want to see the region represented in full 3D. Because I think it would simply look better, and because I know it's possible. With a remake of an older game on stronger hardware, I would prefer to see abstractions lifted.
Fact is all the Pokémon games up to the end of the ds (and then the 3ds titles also did to some level) did exactly that and I'm not going to pretend it's in any way sane to think it's ok with sprites but not with models.
This is what you originally said. The classic Pokemon games absolutely
needed to use miniaturized representations in the overworld so no one ever expected the full character models to be portrayed there. It
is sane to expect more with models, because they literally moved on to using more proportionate models starting with Gen VII, and the hardware can display it. If you prefer chibi models in the overworld, that's fine, but you frame it as a question of 'sanity'.