I understand from a business perspective this giving all this would be hurtful for apple as it would cannibalize other products and decrease revenue. But I am trying to understand if there are technical challenges in addition to business motives.
Is there an appetite for such a product if the app ecosystem was also available ?
No, not really. Samsung has DeX[1] which is exactly what you describe - connect your phone to a USB-C hub, plug in HDMI monitor, keyboard and mouse and you'll have phone as a computer with full windowing operating system. I tried it once with my Galaxy S21+ which would be fast enough to be my daily driver computer, but for many reasons it just didn't work right. Maybe it's Samsung's DeX but I doubt it because using an iPad as a laptop also doesn't work (for most people including me).
Its not as useful as you would think. You can access most commonly used apps as a web app on a laptop or a desktop. The only real advantage would be file locality, but phone storage is somewhat small.
There is a small use case of mobile gaming where you want to play a mobile game with a keyboard and mouse, but that is very niche and custom solutions exist for this.