OP, you are so right about this. And I have good news:
Bluesky's architecture is designed around learning the lessons from all the platforms that came before it to make something that works for user joy over engagement farming (including rage bait). On the surface it looks like Twitter, but you slowly start seeing the other influences.
Following is the main feed. There's an optional Discover feed for things you might like, and a popular with friends feed, but most people ignore them. You can follow other feeds that bring together tags and keywords (much like Tumblr), and sometimes do other nifty things, and choose if you want them mixed in your Following feed as well as separate. Getting settled can take longer because much like Tumblr you have to find the people you want to follow on the grapevines. They will not just be fed to you.
People can make Starter Pack lists of people they think others would enjoy following. Often based around themes like Black Academics or Cat accounts (that don't post stolen content and use alt text) or Indie TTRPG Creators. Great way to find people you follow based on the recommendations of another person you like.
Site moderators
Who are trying to be better than other sites, and talk about what they're doing to improve their responsiveness (especially since the sudden user growth rate has them scrambling to plug in more servers let alone hire and train moderators).
Moderation Lists.
Community moderation you can subscribe to (and unsubscribe to). You can choose to block or mute the accounts on the list. Allows communities to have much more nuanced control of who they block. Often respond to threats faster than site mods could, and bound by a personal code of ethics instead of a general TOS. A notorious transphobe joined recently and by the time I saw word of her to block, 4 of my moderation lists had blocked her for me first. This feature has been key in helping marginalized communities protect themselves.
Nuclear block.
Blocking someone basically wipes them from existence for you. Very strong site culture of blocking people instead of pointless arguments and dunks. Which means a lot more people productively work through smaller differences or misunderstandings because we're not in constant fight or flight mode fending off the worst people ever.
Choose who can reply and if quote posts are allowed with the ability to change that later. Hide a reply for you or everyone and it's hidden for real + breaks it off the thread. Blocking someone cuts off their replies from the thread or their quote posts. Can also detach a specific quote post if someone's trying to cause drama. It stops dunking and other harassment, or just unwanted attention. Which again means that people aren't in constant fight or flight mode when posting.
Standard mute words and tags feature is there and it actually works for real. Don't like something? You won't see it. Works on alt-text, too.
The result is a significantly more chill and friendly site that can effectively deal with unwanted interactions well enough that everyone can calm down and enjoy things together. Because people are seeing what they actually want instead of rage bait, artists and other creators have found their engagement is much higher even with fewer followers.
So yes, OP, you are absolutely correct about what would make for a better social media experience. It has been tried and it's working. It makes everyone so much happier and nicer. It lets people actually sit down and solve complex problems, even while shitposting about them.
Ben Collins joking about buying The Onion to save it led to him actually doing it, and joking about The Onion buying InfoWars led him to being able to do that, too.
The anti-Blackness problems of early Bluesky were reduced enough by the moderation and content control features being added that Black Twitter has been rapidly moving to the Blacksky community. Trans people aren't under constant attack in our mentions, and attacks that do crop up can be systematically weeded out. The Worst People You Know have been repeatedly deplatformed on Bluesky by the user base itself and keep writing whiny complaint columns about how no one will engage with them there.
I've watched my fandoms rapidly grow from ghost town to thriving bustle without major drama, even when negative opinions show up in the feeds. It's just so much easier to shug it off and just keep scrolling. If anyone starts acting weirdly they can just be gotten rid of before an actual problem starts. Artists are sharing 9 years worth of their old fan art and everyone's having a grand time.
Tumblr is bizarre and unique enough that I enjoy hanging out here as well, but every other site can go in the bin. My mental health and overall well-being have dramatically improved since ditching Xitter (with very little Meta or Reddit usage already). I feel less inclined to hate humanity as a whole because I can actually connect with passionate, interesting, and kind people. Even when there is bullshit it's at such a more manageable level that it's just irritating instead of threatening. Having the tools to assert my boundaries has helped me better enforce them everywhere else because I have seen how nice the result is.
A better world is possible. We can build it, and are building it. Now that we know it works, we can start pestering every other website to take those lessons seriously.