Should we also listen to music in Dolphin? Watching video in Dolphin? Edit files in Dolphin?

I mean, yeah. I use Krusader, and the reason why I use it instead of Dolphin is because Dolphin doesn't give me an easy way to edit files and view images. In Krusader, "Edit" is F4 and "View" is F3. (It does open a new window, though.)

Music and video files are easy. Previews, baby! Previews are very convenient. I want to make sure that I'm about to open the correct file. Or I'm trying to find a specific file, and the file names aren't making it obvious. And so on. Now, this isn't something that I've felt the need for, but it's easy to see use cases for it.

Should we make Dolphin the only app on the system and do everything in it?

I would say that if something is going to take me only a minute or two to do (or less), then it's more convenient to do it from the file manager than to open a whole new program. Technically, Krusader is using kate, etc. under the hood to do all of that stuff, but it's through the Krusader interface.

Typically, when I open a terminal I want a normal size one, so I can see file listings, scrolling data etc. In my case I would say 99 times out of 100 I want a regular terminal rather than a small one at the bottom.

In your case, sure. But other users are going to have other use cases. Not everybody thinks and works the same way, so what works and makes sense for you isn't necessarily going to work and make sense for other people. That's why I like KDE so much. It's very flexible to the needs of users.