Then why not 100Kb blocks? 1 or 2 Mb way too big. 100Kb is even cheaper and simpler.

Small blocks centralize who can afford to transact on chain. People not transacting on chain won't run nodes. This also centralizes Bitcoin.

There is surely a conservative way to increase blocksize without going crazy. Consider lower end of global latency, bandwidth, and storage based on current tech and go from there. Even Lightning eventually fails to work without ~100x increase in blocksize.