Would this have given the C128 more focus and resulted in more sales?
https://www.computinghistory.org.uk/det/46843/Tandy-Color-Co...
was highly compatible with the earlier TRS-80 Color Computer and didn't have a special compatibility mode. The C128 was more radical though because it added another CPU and compatibility with CP/M software.
I think those "8 bit" machines were on the run at that point. There just had been an attempt to make super-low cost machines to compete with the Timex-Sinclair
https://en.wikipedia.org/wiki/Timex_Sinclair_1000
which resulted in machines like the
https://en.wikipedia.org/wiki/TRS-80_MC-10
but the world was really going in the opposite direction of a computer that was more expensive and a lot more capable in the guise of the "PC Compatible". In 1981 you could point to CP/M as the high end microcomputer OS for business applications but in 1985 when the C128 came out, the business software market was moving decisively towards MS-DOS and the PC. So I'd say putting the Z-80 in the C128 was a mistake, particularly because the Z-80 didn't add anything when the machine wasn't in its third mode, had it been a coprocessor which made the C128 mode better it might have been a different story.