I don't have this problem in practise. It's not "break flow to switch modes" for me. I don't type this way. There's always as much movement as there's typing, especially while programming. Even when writing prose I exit the insert mode each time I think of what to write next making this always a good "undo point".
If I make a typo while in the insert mode I just remove last character or last word. I guess you could argue that this is something that undo should also cover but I don't see much need for that.
I'm not in the insert mode, exiting to normal mode for movement and undo. I'm in the normal mode entering insert mode to write.
What problem does a magical "does what I mean" undo solve that pressing ^W or ^H doesn't? At a minimum, your "superior workflow" is "<Esc>ui" or "^Ou", both of which are more keystrokes and require your editor to read your mind.
Or my superior workflow is Alt-u or hold U, which is a single shortcut/keystroke, so you lose there as well
The other issue with your attempt at solving undo without undo is that the deletion doesn't become part of redo, also a single word with a typo could be in the middle of a paragraph where you navigated with a trackpad, while ^W would delete near the current cursor position
You don't need magic to fix the ubersimplicity of current defaults, just a bit of openness
So now it's not "more keystrokes" as you originally claimed (and it's a higher number of keypressses vs holding U), and you still haven't addressed the issue with ^W I've described
If I make a typo while in the insert mode I just remove last character or last word. I guess you could argue that this is something that undo should also cover but I don't see much need for that.
I'm not in the insert mode, exiting to normal mode for movement and undo. I'm in the normal mode entering insert mode to write.