I would love to see a federation model where each user has an encrypted profile and content in their own archive that they manage and/or have stored somewhere for them, which they can then use to join servers and choose what data from their profile they share with who else on that server, as well as participate in server local and federated public channels, as well as private data exchanges facilitated but not readable by the server or federated network of servers you have a user account signed up.

This sounds like more work/requirements/issues placed on the casual users, it won’t work, people are too lazy. You have to lean into the 90%/9%/1% rule and let the instance admins and community moderators handle everything for the casual users.

You’re right though, it doesn’t need to be ActivityPub. However no one says a platform can’t support multiple federation protocols at the same time, at least while a transition is ongoing.