Holostars is kinda just stuck where they are, they aren't popular enough for Cover to consider folding them in with the rest of Hololive, but said separation limits their popularity in the first place. Though I suppose if they do start growing significantly, Cover would see that as a sign that their current system is fine, so yeah, integration is very unlikely.
Hololive is an idol agency, and the talents are labelled as such by Cover themselves. They're a very effective idol agency, at that. Having separate branches for girls and guys mimics "irl" idol agencies, which have separate girl and guy groups. Unfortunately for Holostars, male vtubing does not have a huge audience, unlike male idols, and what audience exists is mostly going to Niji (though that being said, the Holostars guys are still doing much better than most indies, of course). Male idols appeal mostly to female fans, and vtubing as a whole has just never made big inroads with a female audience - even the big Nijis like Kuzuha and Kanae have predominantly male fanbases.