As someone who works in this problem space, I promise you with 100% certainty that the type and quantity of data collection being done without kernel access would be far more distasteful than what's done with kernel access. You can take my word for that or not but I obviously can't say any more than that

Including cheating functionality in games is already done and people hate it: it's called pay-to-win microtransactions.

The archetypes for cheaters are such that they don't provide ways to please the a large portion of cheaters without harming players because harm is their goal. And the other group is trying to make money by charging for services for players and then cheating to complete those services as fast as possible. There are no in-game features that can be created to mitigate these people.

The only class of cheaters that can be dealt with as a service problem are those that are cheating to a) catch up to others or b) offset a skill shortfall or c) offset a time shortfall. This makes up only a subset of an cheaters