"Android Instant Apps" -> aka web hijacker
By the way, this is clearly a first step for the merging of ChromeOS and Android. It is also possible that these "apps" will have limited access to Android APIs. In fact, I'd like to see exactly that in my Chrome browser on my desktop just to give it a try.
There's already dozens of pages that detects you're on a phone and send you directly to the play store and that you need to bypass using the "request desktop page" just to get access. Or event worst, sites that say let's make the mobile version less accessible while telling people it's better to install the app (Linkedin I'm looking at you)
This seems like a new step to give more power to publishers than to empower users.
Even during the presentation they said "We want you [developers] to be in control of the experience"
If I don't have app X installed it can mean I don't know the app. But also it can mean I find it a resource hogging, data gathering piece of turd and that's why I'm using a website.
It seems that choice has gone now.
The primary entry point into Android Instant Apps are normal URLs which get shared over Email, SMS, or Instant Messaging, but for those URLs to ever get shared, they must already exist and work on the current web. So you still have to put in the effort of building a full Web experience.
...and Android can automatically enhance progressive web apps to provide experiences that are capable of being indistinguishable from native. Plus, it will work just fine everywhere else. Because it's the Web.
And you pretty much have to get close to that point anyway, since Instant Apps are useless without preexisting, functioning links for the app to hijack... why would you then duplicate the effort to have a version written in Java? Access to payment APIs is compelling for the B&H demo, but for Buzzfeed?
...and wouldn't you already be doing your damnedest to provide a similar experience for iOS or desktop users, on the Web itself?
Google, rather than taking a firm stand on which is "right", is providing tools so that developers can take either approach. Google, in this area, is more opinionated on the kind of UX that should be achieved than the route.
Now, you make some good arguments for why Progressive Web Apps might be the better route.