Just follow the RyanAir model for Y: pay for non-essentials. Simple. Hugely successful airline, largest in Europe. Let's not pretend people actually put their oversized "personal items" under the seats because many don't so your points about 1-2" difference are moot. Ys are budget travellers mostly indifferent to perks and care more about price. 1 personal item, zero carryon allowance. Problem solved.

In turn, there will be more leeway, perks for premium-cabin travellers and FFs who are interested in perks and comfort. They mostly would rather the perks to be offered than to have to ask for it, and look like a ......... in the process. Nobody wants to be a DYKWIA.

Less of the half-... trying to please everyone and ending up pissing off everyone like many of these legacy airlines.