The defining issue is that the government in Taiwan was considered to be the government of all of China, and the authorities in Beijing were not recognized as a government of China. So Taiwan was the residuary for all of China.
America has made it very clear in several administrations that if there is an attack by China on Taiwan, the United States is very likely to resist.
I have great respect for the Taiwanese. They have done an extraordinary job. But it was not a sustainable position to say that the legitimate government of China resides in Taiwan, which at that time didn't have much contact with the mainland.
Certainly nothing is easier than to rewrite history. If we had made Taiwan a separate state, it would have led to a fundamental conflict with China, and probably to war. Certainly in the long term, it would have led to war.