If they let you use it, they'd have to triple the price or everyone would connect a keyboard and mouse and use it like a desktop PC, decimating macbook sales.
I think the limitations are entirely for business strategy reasons, not because they believe there is no demand.
Reminds me of how Microsoft require paid Office subscriptions for screens larger than 10.1 inches, but the entry level iPad For students just so happens to start at 10.2 inches…
I've been using a Bluetooth mouse and a keyboard with my old 2018 iPad Pro for at least 5 years. It's basically our travel computer when we're on vacation.
In older versions of iPadOS (it might even have just been iOS back then) you had to enable the mouse under Accessibility to make it work, but in current OS versions it "just works"..
You can even cmd-tab between apps and a lot of the keyboard shortcuts you know and love work in most apps.
I think the limitations are entirely for business strategy reasons, not because they believe there is no demand.