The problem isn't so much that all Pokemon can't be in Sword and Shield, is that people are worried that the game will be a bottleneck so if a Pokemon is in Shiny Sword and Sturdy Shield but isn't in the defaults then it's stuck in Pokemon Bank forever. Game Freak needs to address that.

Honestly, this is all on Game Freak's impulsive need for annualised games. Take a gap year man and I mean a full one, no Ultras or Let's Gos.

all the Pokemon were still in gen 3's code, you just couldn't catch them

that is not the case here