"A generation ago you could connect from EVERYTHING to EVERYTHING at Heathrow"
You still can if the carriers have interline agreements.
Carriers haven't "thrown this seamless transition away". Many pax now book their flights themselves - usually on a point to point (PTP) basis using the cheapest fare for each carrier and often the shortest (sometimes under the MCT)connection time - I mean who wants to stay at LHR longer than necessary (or any airport for that matter). So with separate tickets comes separate contracts and no permission to interline (through-check) baggage.
Through fares are still quoted and bags may be through checked based on interline agreements in accordance with the IATA Resolution 780e.
I suspect that there will be some moves to accommodate VS/DL which has the whole of the south wing checkin area at T3. SQ recently "borrowed" space there from VS. Star Alliance has been accommodated.
LHR transfer baggage mishandling has significantly reduced with the advent of inter-terminal baggage tracking and the BRS. It is true that the more times you handle a bag the more likely it is to be mishandled but VS has an excellent record of safe delivery on the right flight/right day.