"Because then whichever party currently has the support of the majority of the country would win every seat."

That is incorrect. Every democracy that I'm aware of, which uses national voting, also has proportional representation based on the vote. The rules vary from country to country, but generally speaking, if a party gets 10% of the vote, then it gets 10% of Parliament. If they get 43% of the vote, then they get 43% of Parliament.

About this:

"most issues simply shouldn't be federal"

This is a straightforward assertion of nostalgia, regarding an era that died out more than a century ago. Nowadays nearly all politics is either national or international. Small scale political divisions simply get in the way of efficient government.