I always wished someone had made an extended battery mod for these with a different back cover or something. Or that someone had figured out a trick like the S7 batteries in the galaxy S6...
I have this problem --> https://xkcd.com/1586/
Other reasons to spend $1000 on a new phone are a larger screen or nicer screen, waterproofing, more than 2GB ram for better multitasking, better performance in 3D games, better camera, more than 32GB of storage, etc, etc.
Many (possibly most) people also pay for their phones monthly over two years, so the difference between a $1000 phone and a $700 phone is only $10 a month. That's a much smaller commitment than $300 up front.
Unfortunately, you have things just about perfectly reversed. Using stock firmware on Android devices typically leaves a few months' lag time between upstream AOSP patch release and OTA updates for your phone. In contrast, LineageOS devices get updates every week; sometimes LineageOS beats even Google at issuing security updates.
Further, OEMs often discontinue updates after a couple years, while LineageOS will support your device for years and years.
Your tradeoff is really to lose control over your phone for a less-up-to-date OS, (frequently) months-old unpatched vulnerabilities, and a short support period. Your point about users not wanting to root their phones and install another OS still stands, but I dispute your perceived advantages to using stock Android crapware.
PS: Check out the Moto G4 Plus. It has a decent processor, 4GB of RAM, 64GB of storage, a microSD card slot, all the bells and whistles (fingerprint reader, GPS, LTE, etc.), full LineageOS support, and all for ~$220 on Amazon.
I used to use a Samsung Galaxy S4 with CyanogenMod for the security reasons you mention, though. I agree that LineageOS is more secure than most Android phones because the update model is so bad. Sometimes I forget because it's actually quite nice on the Pixel line.
Beware, your Nexus 5 is on borrowed time with regards to the notorious bootlooping.