The reason most games stick to a simple good/evil narrative is because that was the thing that sold.
And it will always be the thing that sells best, yes. What most people enjoy are simple narratives. But the medium is capable of doing more than just churning the same shit out endlessly in an effort to try to appeal to every single person. Not every game has to be for everyone, though, and you can make games whose sole point is to lampoon industry trends or wax poetic about the medium's potential, and they'll have their small audience.
The suggestion that every game that releases should be enjoyable and targeted at everyone is why AAA is what it is now.
You can see the twist in the first Bioshock as either about the player character or a meta twist, the former still works as motivation for your character doing what he does as well as how he got there, while the meta narrative falls flat. So it's not that bad.
The twist works in a film or a comic or a book format, where we are not the one making the decisions for the protagonist. When it's a game, the twist is retarded - if you don't do what Atlas says, you quite really can't progress through the game and your only option is to stop playing. Flaunting 'you never really had a choice!' when all of the levels have one path to completion causes the twist to be... stupid. If you had more than one option, and you could disobey Atlas, the twist (and story) thereby don't work.
It's not a story that works well for the medium. Compare it to the Prey reboot? thing by Arkane, which is way more System Shock 3 than is Bioshock, and you see the issue. Prey's ending has a similar twist as the Ryan debacle (everything is predetermined), but it at least gave you the impression you were actually making choices.
Isn't the "press X or the baby dies" a joke about it?
That sequence strikes me as a joke about how certain people will chase any carrot on any stick if there's a promise of 'content' behind it. I take that part as shitting on how often games started intentionally throwing things in that are mundane and tedious whose only point is to waste the player's time, which has become an industry standard (that most players fucking love, because they are retards).
Anyways the game I played is a game where you start as amnesiac and needs to do a mission, you finish the mission and then start again with a choice to remember what you did the previous path, which leads you to make different choices that reveal more of the world and aligns you with different faction, etc.
So, when thinking about the analysis of that game, consider how it works. You have a straight line through the first time, presumably, and then you loop around from the final 'node' of it back to the first. You repeat the story again, except now there are additional decision paths that branch out from different nodes. This is an adaptation of branching narrative, which is just tried and true.
This is also why Stanley Parable isn't calling this kind of storytelling bad. Because it's retarded to call branching narrative bad. Calling back to Telltale's Walking Dead, that game released in 2012. Stanley Parable's mod-form was 2013. Walking Dead made a huge deal out of 'player choice' and 'THIS CHARACTER WILL REMEMBER THIS!' and was pretty obviously a cynical appeal to people who don't like and don't play video games. Because it's just branching-choice narrative, something that has been in games from the earliest days.
If SP is saying anything about branching-choice, it's that it's nothing particularly special in and of itself, as Telltale would go on to show by writing absolutely dogshit stories that made virtually zero use of branching-choice narrative, only to be surpassed in their shit quality by David Kage down the line. The quality of writing and the narrative itself aren't really related, barring that more complex narratives demand more capable writers.
I think the issue of gaming was that developers realized that people would rather make gameplay choices than narrative choices
You can't... really make narrative choices as a player. I've tried to think of a way to do this, but even choosing not to explore a branch is still making a choice, and the branch is still there. As a player, you cannot change how a story is structured and told - you can just choose how you progress through it.
Most players like simple, straightforward narratives and seem to love autistically poring over endless, stupid, irrelevant lore. You can bloat up your story to be a completely godawful, shambling mess with way too many spinning plates and gaping plotholes - but as long as you keep the actual narrative simple, people will eat it up and praise it (Mass Effect).
Games that come along and explore more abstract and bizarre forms of narrative (AI generation, integration with other aps or mediums, etc) will generally not be as well-liked as the conventional kind. SIREN's bizarre narrative is the kind of thing people love to watch videos about, but hate to actually experience.