Pixels are a minuscule fraction of Android devices. Google would get more money by improving Android than by trying to increase their own marketshare.

Because the market is bigger than Pixels and they could license much of it (I'd like to see more of it as open source, but it's easier for a corporation to justify licensing the cutting edge stuff). I think a lot of OEMs would like access to Night Sight

Regardless of the actual software processing details, in the wider population of Android consumers I'm pretty sure it's Samsung that has the reputation for photography.

Samsung's advertising focus is on advertising things that people understand and think they want, not AI assistants and cleaner versions of Android. Most of the reviews of the Pixel 8 criticise no telephoto lens while Samsung tends to have an excess being shown off.

Like everything Google does, I'm not sure it is any good at understanding people as humans rather than people as aggregate statistical models and that shows in its consumer devices.