Let's not forget why we started using separate database server in the first now…
A web server does quite a lot of things: Parsing/formatting HTTP/JSON/HTML, restructuring data, calculating stuff. This is typically very separate from the data loading aspect and as you get more requests you'll have to put more CPU in order to keep up (regardless of the language).
By separating the web server from the database server you introduce more latency in favor of enabling scalability. Now you can spin up hundreds of web servers which all talk to a single database server. This is a typical strategy for scalability: decouple the logic and scale up individually.
If you couple them together it's more difficult to scale. First of all, in order to spin up a server you need a full version of the database. Good luck autoscaling on-demand! Also, now every write will have to be replicated to all the readers. That's a lot more bandwidth.
There are definitely use cases for Litestream, but it's far from a replacement for your typical Node + PostgreSQL stack. I can see it being useful as a lower-level component: You can use Litestream to build your "own" database server with customized logic which you can talk to using an internal protocol (gRPC?) from your web servers.