Agree with @poe7645.

I'm both a 1. and 2.

For most (99%) of my BTC, I use only non-custodial wallets (about half a dozen, including Electrum and HWs) and I strongly encourage people to do the same. But I don't mind, for convenience and tiny daily spending, using more custodial options.

For me, the current SN solution is totally OK. Most SN users will never have significant amounts on SN. And most importantly, the UX is great for newcomers. Just scanning a QR and getting an instant Sats wallet up and running, form which you can withdraw anytime... All this is perfect. Heading to more complex solutions will probably add some friction to onboarding new users to SN.

It's actually a strategic question: which kind of users to you want to attract here? If the answer is "anybody", then don't change anything.

Also, it may be an unpopular opinion, but I think that you should devote more time extending and developing SN rather than trying to "fix" something that works perfectly...

All in all, SN is and will always be an app, not a wallet.