Ah, you're saying that because miners have a time limit, they won't want to fill up their blocks.

What I'm saying, and now I think you do understand, is that mining is a random process so miners should send every block out with whatever transactions they included in it when they found the correct PoW; we're in agreement on that point.

However, without a limit, what reason do I have to send the miner a high fee in the first place? Provided marginal cost of including my transaction, based on network costs and the increased chance the block will be orphaned, is less than the fee I attached they'll include it. So naturally fees will settle down to that marginal cost. The problem is the network cost is tiny, yet has nothing to do with the long-term cost of storing the UTXO set, and also is fixed so that profitability for larger, more centralized, pools is always higher than smaller pools. The other side of the cost, the orphaning chance, goes down as fees go down, essentially because if fees aren't significant, the loss due to orphaning isn't significant either, so you can take more risks and try to stuff more low-fee transactions into your blocks.

It's a nasty race to the bottom - a textbook example of how capital intensive businesses where efficiency goes up as capital investment tends to result in oligopolies or monopolies in the long run.