ISTM what would be better is allowing people to define new LO tables, so we're not stuck trying to cram all LOs into a single table.
As for returning free space, that's a bit of a challenge period, for all tables.
> Would crowd-funding help here?
Possibly. The first thing is getting the community to agree that there's a problem that needs to be fixed. Once that's accomplished crowd funding would be a good way to get it actually built.
This seems like a chicken-and-egg thing. It seems storing large stuff in PG (using the LO-API) is not recommended and many cheat by only storing a path to the file and store the file elsewhere, sacrificing transactional integrity. Because the support for it is not so good few people use it, and because few people use it the community doesn't think it's a problem worth spending time on fixing...