The Dynamic Island is all software lol. It doesn’t need the sensors to be visible or big. In fact, if they make them smaller you actually get more space for actual Dynamic Island space.
It was sold as a feature in an attempt to cover up the ugly FaceID area. My point is that they'll remove it as soon as they don't need to hide FaceID components anymore. I'm aware it's software - that's my point.
I highly doubt this rumour will live to see any light. Based on the credibility of the source and on Young’s rumours, the first stage of the dynamic island removal will not be seen until next year.