I'm not saying that policy is always sensible, rather that policymakers have the right to make it what they want. If the policy is swiss cheese to anyone who knows what a compiler is that nonetheless might meet the policymakers goals.
I disagree with your description of the Virtual Machine as a technological sledgehammer. VMs make it trivial for "Systems" to hand out sand-boxed units of server space, without requiring any domain specific knowledge about how exactly those servers are going to be used.
I just don't see who really wants "unprivileged package management." In an ideal world where packages never conflict and there are no bugs it sounds great, but when security/functional upgrade X breaks Alice's programs, but is required for the well functioning of Bob's, then the admin has to step in and fix the conflict. If I'm that admin, I'm just going to hand out VMs to everyone who needs one and reduce a space of 2^N potentially conflicting configurations to N independent systems. If the package manager is capable of allowing multiple version installations for every user then it is just implementing containers (AKA VM-lite) and we are talking about the same thing.