The issue of larger block size and decentralization could easily be overcome by simply allowing full node operators to have better control over their uptime and bandwidth usage or number of peers.
The torrent network has had this feature for years, allowing everyone to participate to whatever degree they can, without overwhelming their own bandwidth capacities.
If people could leave the node running but have it shut down during the day and only run while sleeping, while still being able to easily select their bandwidth tolerance, thousands of new nodes would likely pop into existence. With Bitcoin being international I suspect there would always be plenty of decentralization.
Even if the block size was 16mb right now, most of the miners would probably only allow 2mb blocks for instance. The limit is only a safety guard against malicious miners which are few and far between, especially since they actually need the power to solve a block to create the large block in the first place.
Too many people exaggerate the effects of increasing the blocksize especially if they are aware that the miners themselves still have total control over how large the blocks actually are.
This sensibility paired with node operators being able to more easily control when and how they use their bandwidth would create conditions for increased decentralization in my opinion.