This reads (to me) as a rather hasty generalization, if not an inaccurate conflation between “Agile” and unhealthy, cross-functional software teams.
That the tools of Agile have their fair share of difficulties, particularly at scale, is not the same as the corporate bike-shedding and interdisciplinary strife that you point out here.
I completely agree with the idea that arguments about designers coding tend to “avoid the single most important question: how do we create software?”
But haven’t you, in stating “[I] don’t want to get into an argument on this point,” under a section titled “The real issue,” avoided that very question?
My experience working in an environment that purports to be Agile is quite different (sans the occasional technical hand-waving and smoke-blowing) than the one you describe. And given the preponderance of organizations who have reaped the benefits of Agile, I’m curious to get a deeper take on from where exactly you think these problems stem.