There's a variety of reasons they didn't do this.
I'm well aware of the reasons behind how they implemented flight.
It, however, remains that some people might not like such a limited form of flight.
The same goes with Act 3 when the player needs to find a way into the city, it would be trivial to sequence break it if you could just use fly to fly into the city.
Act 3 would make less sense for things to be sequence broken. As you'd think they'd have precautions around such common things like Flight and Dimension Door spells. I mean, if people are just leaving scrolls for these spells all over the place that any old pleb can use, then surely they'd think "Hmm... Maybe someone will use one of those spells"
Of course... Considering you can pretty much just walk through the front gate anyway, with just a minor distraction, it's not really much of a "Sequence break" to just fly/DD into the city...
Other things are more susceptible to sequence breaking. Of course, unless you use arbitrary reasons to thwart them (Like, why can't I leap across the bridge by the Githyanki patrol in Act 1?)
While, to be honest, flight as it is currently implemented would also be able to fly into the city. Since it's not like flight can't take you over the wall. It's just you can't hover mid-air which is irrelevant for pathing purposes.
#3. It would be really hard to balance if the player could easily move all their characters out of melee range at any time.
It's really not. Since you just have to have enemies have a ranged attack (Which given that players all have the ability to wield melee weapons and ranged weapons and swap between them as a free action, isn't hard) to break concentration.
Also, technically, it is possible to move all characters out of melee range at any time. Storm Sorcerer's get bonus action flight + disengage after using any leveled spell...
For bosses it's even easier to solve this, as you can give them unique abilities to deal with fliers. Like the Avatar of Myrkul has a unique attack that damages everyone and pulls everyone into melee range if no-one currently is on his little platform. Not even as a Legendary action, but part of his regular fight.
Solasta actually does allow for mid-air hovering and it manages to balance the game so it's not all about flying around. Since all enemies have a ranged attack, even goblins throw stones at you (Which is something that the skeletons outside Withers coffin have, if you looted all their weapons before activating them the Skeletal Warrior will start throwing stones at people). Then once concentration is broken... You fall. Which, if you haven't also got Feather Fall active means fall damage and incapacitation for a turn.
Like why would I bother playing a druid and wildshaping if going 4 wizards is always the best strategy.
I mean... You can say this now. There's certain builds that are just clear and cut better than everything else. But not everyone wants to (Or even needs to) play only the best strategies.
Even if you could hover mid-air with flight... I'd rarely ever use it personally, as I'd want to use my concentration on things like Spirit Guardians, Wall of Fire, Cloud of Daggers, Sleet Storm, Call Lightning, Hex/Hunter's Mark, Moonbeam, Hunger of Hadar, Haste etc... Things that actively help finish combat rather than something that maybe makes melee enemies less capable of hitting my caster (Something basically already covered by Fog Cloud and Darkness... Which also inhibit ranged attackers to boot)