To add to other answers, you have to consider how changing connections have shifted the mind-set over the last three decades.
Connections to external devices have improved tremendously; we now have really good, standard, well-supported connections (physical connections such as USB3/USB C and Thunderbolt; and wireless ones such as wifi and Bluetooth), so almost anything you want can be connected to your computer without putting it inside the box.
But that situation has only arrived gradually. Connections to external devices used to be generally proprietary, slow, hard to configure or use, unreliable, specific to particular device types, and/or needed the device to be bigger, heavier and/or more expensive than a device which fitted inside the box. So in the Olden Days™ internal devices were the default: once fitted, they were simpler, cheaper, smaller, and more reliable. Or, in many cases, they were the only option!
So if you were a power user who wanted (say) a few hard drives, a DVD reader, a CD writer, one or more floppy drives, a sound card, a modem card, connections to a dot-matrix printer and a laser printer, not to mention a decent graphics card, then you needed a machine with enough internal connections and physical space to hold all that! In the mind-set of the time, a physically bigger machine was a better machine, because it allowed you to do more with it.
And the proportion of power users was a lot higher back then, because most ‘ordinary people’ didn't use computers. Why would they? If they didn't want to play games, or print out correspondence, or do their accounts, there wasn't a lot of reason for the expense of a computer. That changed very gradually, once the Internet became popular and more people started using email and the WWW — and then manufacturers started making smaller, simpler machines for such people. Arguably, it was the release of the iMac with its consumer styling, small size, limited connections, and use of general-purpose USB instead of separate proprietary connections, that really drove the move towards smaller machines and external devices.
Since then, PCs have got progressively smaller because they no longer need to be so big — modern connections allow almost everything that you could put inside the box (except processing and RAM) to be done from outside, usually with similar speed and reliability. So size now has to be justified; it's no longer the default that it was.
