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I agree that the downsides outweigh the positives, but they do provide security to a certain extent.

For example, you can give your grandma an iPad or a chromebook, and there’s very little chance of her accidentally installing x nasty malware.

Give her a proper laptop, and at any one time she’s about 6 clicks from something dodgy, especially if she’s on social media.

That's because of system-level protections like the sandbox, not App Review or the App Store.

yes but if you allow alternative app stores, then what? it’s either regulated by apple, which defeats the point, or it’s a security risk.

I’m against walled gardens, I just disagree that there’s no security upside to it

put a system setting in place that lets you lock down the device if necessary with a password so grandma can use it safely?

As OP points out you do not need an app store monopoly, you just need adjustable device settings.