Bitcoin was designed to be a Peer-to-peer electronic cash system, and that is what it should be. I would note however that even if Bitcoin is used as a P2P electron cash system, it can also be used as a settlement layer, however there is little reason why anyone would want to do so.
That depends. There is a difference between what it can be and what it should be. As we can see there are limitations that currently would prevent a lot of people using Bitcoin everyday (even if we increased the block size limit tenfold).
A lot of people are not using bitcoin every day currently to the point that 10MB blocks will not be enough today. If we increase the maximum block size today then there will be excess capacity in found blocks that will allow for future growth in transaction volume until we need to raise the maximum block size again. As long as Moores law allows us to increase the maximum block size at a rate that is faster then the transaction growth rate then block size increases will be sufficient to allow Bitcoin to scale. Around 20 years ago a significant number of households did not have internet access and those that did had connections that allowed them to download at speeds that max out at roughly 28.8kbps, and now broadband internet is widely available throughout the US and internet connections are available with download speeds as high as 18mbps for roughly the same price, and the US is generally behind the curve in terms of broadband internet access when compared with the rest of the world.
This is what was so good about BIP101 in that the block size would
automatically increase every 2 years, so there would not be this contentious debate that is making Bitcoin look very bad to the outside world all the time. Granted the doubling of the max block size every two years might have had a higher growth rate that Moores law would be able to support over the long term, but this could have easily been fixed by say slowing the growth rate to something like doubling the max block size every 2.5 years, or increasing the maximum block size by 75% every 2 years, or increasing the maximum block size by 75% every 2.5 years, or some other variation thereof.