But that is not a fault of WiFi as a medium, ...

but it is a fault of WiFi as a choice for that application. Just because it does wireless communication doesn't mean it's suited for any application that needs a wireless protocol. Using it for very-low traffic applications is simply not what it was designed to do, and it has significant negative effects if you do. Any device you add basically slows down any other device by a bit. And wifi network you add in a physical area decreases the effectiveness of all other wifi networks in it's vicinity. In even medium densly populated areas, wifi is already borderline unusable due to congestion. Your proposed (dedicated) hub is a good idea for network isolation, assuming it's designed and configured correctly, but that also comes with more and frankly just as bad security implications, just different ones. To be clear, having like a light bulb or two wifi is a fine choice. For 50 or a whole smart home network, it no longer is.

Both Zigbee and Matter do not rely on cloud connectivity as a protocol, though many of the manufacturers implementations do effectly add that on top: you get the exact solution you propose here as well. At least with these standards you can control everyhing locally, if you want to, and you don't congest the spectrum nearly as much as wifi does.