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Yes, that would definitely work.
I think the thermo might possibly be software, not hardware limitations. Even if they created a PS5 edition of Dreams, they might have to rework the thermo system entirely. Mainly because the game gives you warnings of performance drops when your hardware begins to struggle, not when you are at a certain thermo percentage.
I believe thermo is also to assist in download times and prevent the game from overloading on resources.
If they made thermo 2.0, and a PS5 user now has about 125-150% thermo, any creation exceeding 100% would be hidden from PS4.
A dream containing a scene exceeding 100% would either hide the entire dream, or allow the user to skip the scene.
Sure, it would be a nice addition, but a little extra room to mess with doesn't really have that wow! factor to bring people in/back.
If Mm really wants to pursue this, go ahead, but I'm still waiting for the exporting and online multiplayer mostly.