It really has nothing to do with cost. Creating a character customization system that offers plenty of options is a lot more expensive than just creating a static character model.

The main argument for using the Featureless Protagonist is that it makes it easier for the player to project themselves into the character. A well-developed character will have views and opinions that might conflict with those of the player. Their decisions and actions will not always be those the player agrees with. This can lead to cognitive dissonance when the player tries to identify with them.

And this also works in the other direction: RPGs are about giving the player freedom (or rather the illusion of freedom, but that's a whole different subject...). But this freedom can collide with the characterization of the player-character. For example, when the player has the protagonist do things that seem wildly out-of-character for them. Then you might end up with some jarring ludonarrative dissonance. A featureless protagonist helps here, because in that case it's up to the player to decide what is and isn't out-of-character behavior for them.

Which of course doesn't mean that an RPG with plenty of meaningful choices can't work with a well-defined protagonist. At least if you have good writers on board who can come up with plenty of options that cover most player intentions and still make all of them seem in-character. Some famous examples are the The Witcher and the Red Dead Redemption games.

And then there are also games where the protagonist is highly customizable and of malleable personality, and yet has a place within the game world and a character arc tied into the larger narrative of the game. Like the Mass Effect trilogy or Cyberpunk 2077.

So neither choice should be considered inferior or superior to the other. It's just one of many design decisions to be made when developing a game.

Cost

Indie developers often do not have the resources for a blank slate character editor. They do often use a defined protagonist, though. That puts somewhat of a damper on the cost theory.

Context

The narrative around the protagonist does not exist in a vacuum, and will absolutely be adjusted to fit with other things.

You say you prefer the defined characters, but are you sure you would want that in the desolate worlds of Bloodborne, Dark Souls or Elden Ring? Would a realistically fleshed out character not just be... depressed? That does not sound like it would add much value to the game. And obviously, a wisecracking Marvel character would be jarringly out of place.

Frame Challenge

I would lightly suggest that your questions will not lead to the most productive answers for a game developer. I would say the opposite question is something like

Does establishing narrative facts about the protagonist reduce the ability to role-play by making own choices?

And technically the answer to both is "yes, obviously".
However, I would say it is a misleading starting point to see it as one big black-or-white decision.

Spectrum

First, about the black-and-white part.
It makes more sense to see it as a spectrum, where no game is on either end.

The actions the protagonist takes in the game are ultimately part of the narrative. So a game on one end, where every narrative fact is nailed down, is... a movie.

A game on the other end, where the player can decide everything... it becomes a philosophical question. Take something like the Elder Scrolls games, which are pretty far on the side of player choice side of the spectrum. Well, you still don't have the freedom to choose a life as a blacksmith. At least not to the point where you get a game-finished screen that says "You lived a good life as a blacksmith" before it rolls the credits. You also can not play as an alien with a laser gun.

Being a part of a world already establishes some narrative facts about a protagonist.

Details

Now, about the "one big decision" part.
It makes even more sense to see it as several details that stand on their own.

Maybe you can customize the protagonist's face, but not their clothes, e.g. because they are part of a group. Then being part of that group is a fact about the player that can be expanded upon with the narrative.

Maybe you can customize the protagonist's clothes, but not their face, because it's a character like in Sekiro, where the narrative can go into details about that character.

I'm saying it makes more sense to see it that way, in the context of being a game developer. Because every time such a decision comes up, there are several other things apart from (but also including) cost, that go into it.

We ourselves do not know how the facts will align when we come to such decisions in games we develop. In the same way, we can not generalize which facts played a role for these decisions in different games.