The problem is when even Nintendo’s own first party titles are struggling with the hardware. That wasn’t that common with the Wii, 3DS, or previous consoles but very very very noticeable on Switch
Super Mario 64 had abysmal performance for a title on the N64 that wasn't even that complicated compared to things that would later release on the console.
But in the 90s, when you got home with your very first device capable of rendering "real time" 3D graphics for $200, you didn't really care that "real time" meant 12fps at times. We used to have pretty low standards for framerate.
And from what I understand, it’s not due to incompetence; rather, it’s due to not yet having confidence that those optimizers wouldn’t introduce bugs. The SDK and toolchain were very new; SM64’s development itself parallels that of the dev toolchain.
So, better safe than sorry, especially with a pack-in launch title.
Kaze, who did that 60FPS optimization, has commented on other videos about how the CPU isn't fully utilized anyways, so -O2 doesn't make too much a difference in most scenarios.
