I have yet to see anyone explain how increasing the blocksize increases centralization. It seems to be some idea that just took hold and that everyone believes in, because they believe in it.
And it doesn't end. There will always be a need for improvements because there will always be competitors ready to take over if we stagnate. stagnation is death.
Lightning requires segwit. Which is to say, it will be as worthless as segwit is.
Increasing the block size will require more storage, faster CPUs, and more network resources.
The further we go, the more we price out smaller miners and move mining to the cartels which is already a problem.
Congrats. It's now been explained to you.
More processing for more work. Yes. And the problem with that would beee.... that you are upset at physics?
Whatever system is used, industry level players will do better than home hobbyists. Storage is cheap and getting cheaper, and 2 mb blocks, for example, would certainly not tax the typical home connection so I don't see the problem. It would not require more processing power as the block reward is split among miners relative to their contribution, not per-flop. Miners would keep their relative positions.