That makes sense and would be decent transition. They way I currently see it is that they could have done the same thing currently done with the island, but with the notch. The pill pushed the black area of the screen further down and left a tiny strip of useless pixels above it.
Agreed -- and I'm pretty sure that there are technical reasons for why they chose the pill in particular. I suspect they needed to move the camera system away from the edge for some reason, perhaps related to the antenna array, or perhaps related to migrating to a bigger camera system.
However, they absolutely could have implemented the "Dynamic Island" software widgets and features around the notch as well as the pill; the decision to restrict those features to the pill was entirely a marketing tool, likely to promote broader acceptance of the pill as the direction going forward. For example...
I actually like the Island though. It could of course be done completely with software.
But just sayin: it is done entirely in software.