The main stumbling block here is that Google wants to tie users' hands in certain aspects, and many of these OSes are specifically designed to undo that control. GrapheneOS does a bunch of stuff to improve security that absolutely could be incorporated into a Play Integrity authorized build. But it also does a bunch of stuff in the name of user privacy that Google would never sign off on.
For example, there are apps[1] that refuse to work without a GPS lock, for a variety of reasons ranging from "I save money on streaming rights by only letting you watch in a specific country" to "I need to know if you're a criminal trying to stuff our banking app with stolen credentials in a foreign country we can't prosecute you in". Some of these reasons are pro-user, some are user-hostile[0], but all of them require handcuffing the user, so Android cooperates with app developers instead of you.
All the permitted ways for a user to manipulate their location are transparent to the application. That is, if you mock your location, the application is told it's fake and can refuse it. Likewise, if you turn off location, the application is told it didn't get a fix. Hardware killswitches are just a more powerful / legible way to turn off location. If the phone instead had a hardware GPS signal spoofer in it, Google would absolutely ban it from Play Integrity.
[0] And, for the user-hostile reasons, those are the terms of sale, so Google cooperating with the user would just get the app taken away because the entertainment conglomerates are big enough to oppose Google's market power.
[1] Client and server inclusive, i.e. "an app is just a website with enough IP to make it a felony to block ads in it". Play Integrity exists specifically to frustrate attempts to modify the client. If you modify the client or the OS it lives in, Play Integrity's signed data will have the wrong hashes in them, and the server will refuse service to you.