Originally, the "o" on top of the letter "Å" was a lower case "a", because the sound could be written as "AA". Over time it transformed into a circle.

Some names today still use the double a, like the Norwegian football player Martin Ødegaard. In that case it is pronounced the same as the "å" sound. (not too far from how an American might pronounce the "o" sound in "for")

Why is a Q just an O with a tail? Why is W just two Vs stuck together? These things are historical and seem normal now, and are hard to change.

Good point! But it seems like diacritics and umlauts are an exception and people usually associate the underlying letter to letters that already exist in the alphabet.

These letters have evolved over time. The latin letters ao was used for the sound but over time it became a ligature where the o moved on too of the a. Similar to how vv became w over time.

While some script are deliberately designed, most are a result of gradual evolution.