Well this is fun.
Do you mind If I join in and try and disect what's happening? If im wrong at some point, please correct me, but:
This part is absolutely correct. I don't think anyone here disagrees with this statement whatsoever.
The problem lies with these parts here:
and:
The implication here, whether intended or not, is that an Isekai could avoid problem (1) by using knowledge of their past life to gain some advantage, making the isekai trope useful over picking a "native residence" of the other world. This is the part that is being challenged here:
In other word, yes, Isekai aren't being used properly, but the concept of a protagonist using modern knowledge to his advantage in an Isekai would be far more difficult/unrealistic than you think.
It would still be possible, I guess. For example, if the Isekai'd person's background was that he was some kind of mechanic/engineer, who's hobby was tinkering with different things. But the MC would have to be specialised in some sort of field for it to be realistic.