Applications and bundled libraries

That is because in your mindset every application is inextricably part of The System. That isn't the way anyone thinks outside of the Linux ecosystem, and it's frustratingly difficult for one side to understand the other.

The average user wants to continue with the same stable system (with the appropriate fixes if they're towards the higher end of the average), but with the option of whatever software versions they choose. A Windows user doesn't expect that updating Firefox may require them to reinstall every other application on their system to support a complex web of interdependencies - the idea would be beyond ludicrous. This highly desirable goal is currently achieved by bundling libraries - perhaps it always will be.

It doesn't have to be that way, but the [overly IMO] rapid pace of Linux distribution releases means that having separate system and applications package trees would rapidly lead to massive combinatorial explosion.