Your point about separating TOTP being more secure is a good one and I acknowledge it. I simply find storing the TOTP together with the password manager to be a reasonable compromise between security and convenience.

Sinking through a cloud drive is better because it diffuses the value proposition of hacking the cloud drive. If someone hacks The cloud provider they are likely to find a bunch of ripped videos and pictures of children and cats, with the occasional sensitive file here and there. Thus it makes less sense as a hacking target while still having lots of the same protections and professional oversight as any other cloud provider.

The value proposition of hacking a password manager SaaS is much higher so it becomes much more worth someone's time to hit.

It's like the difference between storing gold in a lock box in a bank and storing gold in a lockbox in a storage rental facility. Storage rental still has guards and locks and cameras, but will not attract the attention of dedicated, organize efforts to extract value like the bank will.