It's no different than just buying a new graphics card or processor for a PC though. You want to play cross-gen games in the best way possible, so you spend $500 every 7 years to keep yourself from having to run current higher end games on the lower settings or at worse resolutions/framerates. In the act of upgrading you also get to play your existing library with faster load times, higher resolutions and higher framerates as well.
When backwards compatibility doesn't exist, the act of upgrading for anything but exclusives is silly. When you do have backwards compatibility though the act of upgrading just to play your existing library better on top of stuff you can only get on newer hardware makes a lot more sense.
Of course, we're still missing true BC for PS1 thru PS3, but still. The difference between buying a PS5 as a PS4 upgrade and a PS5 Pro as a PS5 upgrade is massive. PS5 Pro is extremely incremental. No access to new software, no meaningful bump in performance unless you specifically game in 4k and it costs $200 more than a PS5 (more in most regions).
You also say "insert the disc everytime" as if most people aren't accruing digital libraries. Besides, in an age where most big budget games are 60-100gb large, you still need to spend the money on the hard drive to store them all lest you deal with installation and download wait times with a portion of your library.
Yes and no. You're talking like PC would be something as closed as a console, and it's far from that. With PC you can get a second hand GPU for cheap, tweak the settings in the game and play more or less the way you want. I mean, I can buy a second hand GPU for 120€ that can run every single videogame at 1080p, because I choose to play 1080p without FSR crap, everything native.
In other hand, a second hand PS5 costs around 300€ with drive, and Sony does not allow me to play 1080p, they force games to run at a specific resolution regardless of your TV setup or what you want, so you have crappy performance because the console stubbornly wants to run the game at the highest resolution possible, no matter the framerate.
But back to the topic, backwards compatibility is a plus, of course, and in this gen is a must. But I am sorry, I don't buy that "massive" upgrade of a PS5 Pro. I don't even buy the PS5 as a PS4 upgrade for the very reason that this generation has been a mess and new consoles had to face new graphical crap that they couldn't handle in a proper way, not even PS5 Pro. It's the first time a gen runs games at a lower resolution than the previous gen, just for the stupid sake of implementing new stuff nobody requested and it was not needed, because people want to play and have fun. The only games that I saw that run well on a PS5 are the ones that are ports of PS4 games being released a while ago.
And I know, every generation had games that ran like crap, it's not only PS5, but this time is way worse than the others. PS3 had some games running at 540p when the console was advertised as 720p gaming, PS4 had some games running at 900p when the console was advertised as 1080p gaming, but PS5 has some games going as low as 720p which is lower than the resolution most PS4 games run. That is inconceivable when the hardware is advertised as 2160p gaming. Even PS5 Pro can't render most games 1440p native. If you don't mind FSR or other AI upscaling crap, good for you, but I want a clear image without artifacts even when everything is moving very fast.
So, at the end of the day, I prefer PS4 because it's been a much more well rounded console that was released without too much pretemptious thinking.
But I support the idea of using a PS5 for playing PS4 games, as well as using a PS4 Pro. If that helps to run games better, it's always welcome, but as PS4 Pro costs half the price of a Base PS5 second hand, I would choose PS4 Pro any day.
And regarding the digital library thing, you're bringing an scenario that is not true. Most of the people do not have big digital libraries for the same reason they buy the games physically. Digital games are still not the thing on consoles, and they won't be in a lot of time, and PC is helping on that. At least PS6 will have built-in disc because they've learnt from the stupid move they did with PS5.