What it is: Day one business meeting, address want of a new cosmetic. Day two, address if it should be weapon or armor. Day three which weapon type. Day four literally draw it and send it to every human in the building. Day five decide it's too dark, do it again. Day 6 approval. Day 7 drunken circle jerk exclaiming how much the (japanse) players love cosmetic trash.
Even assuming this is entirely true, that's still a tiny tiny fraction of the time it would take to create actual new content (which will also have to deal with the same kind of bureaucratic hurdles, likely to an even more burdensome level).
They could spend more time than is necessary every single month for the next five years on BS cosmetics, mounts, swapping out limited time trusts, whatever. Add all that time up and it's still not enough to have created compelling new content. And if they did have the capacity to do new content, you can bet it's going to XIV instead of XI.
So, no, despite it being a zero-sum game, doing this relatively low value cosmetic stuff is not a choice that is preventing any meaningful new FFXI game development.
I happen to be one of the people who think the (low) level of effort is commensurate with the resulting product. Worth it to me.