I'm not good enough at competitive pokemon to have too informed of an opinion, but I'll put in a few observations:
1. The most obvious difference IMO between the good gen mechanics (Mega Evolution and Z-moves) and the bad ones (Dynamax and Tera maybe) are that the latter two don't punish having them and not using them. Megas and Zs require investing an item slot which is a big price to pay if you aren't gonna use it consistently, which kinda precluded using them on every mon, which led to them mostly being used on mons that really needed them, which made them predictable. That's an easy thing to alter, just arbitrarily pick an item with no in-game effect (I'm partial to using Heal Balls so that they can finally be useful) and declare that a requirement to Terastallize. You could even break it up by type, like Z Crystals.
2. The point about Tera being super high-variance and making matches hinge on specific moments reminds me of the debate about whether 3-pointers are killing the NBA. Stay with me I promise there's a good point here.
The 3-pointer was originally introduced to the NBA as part of their ongoing quest to make the NBA less dominated by defensive big men. After the ridiculous career of Bill Russell (11 championships and 5 MVPs in 13 seasons) and the success of Russell-like big men like Bill Walton and Wes Unseld, the NBA really wanted to give shorter players a chance, and added the line in the 1979-80 season. 3 and a half decades later, and the reign of defensive bigs finally started to crack when Steph Curry led the Golden State Warriors to 5 straight NBA Finals and 3 championships from 2014-15 through 18-19, with the top defender being the 6'6 Draymond Green. 3 pointers exploded leaguewide in the wake of the Warriors dynasty, with teams beginning to wonder if 3s were actually OP.
How does this connect to Tera? Threes have become incredibly centralizing, with 38.8% of all shots this year coming from behind the arc, and another 30% coming right at the rim, offences are arguably less diverse than ever before. The NBA game has become much higher scoring (a league-average offence this year scores 112.6 points per 100 possessions, up from 105.6 in 2014-15, when the Warriors won their first title, and last year offences scored 112.0 points per 100). Detroit Pistons head coach Dwayne Casey said "it often looks like no defence is being played... it's impossible to cover that much ground against NBA speed, quickness, and power." Three pointers have also made the game much more chaotic, as a greater amount of game scoring relies on a few threes. The Utah Jazz entered the season openly trying to lose after trading away their two-best players, Rudy Gobert and Donovan Mitchell. They have the tenth-best record in the NBA, and the 4th-best offence, in part by making the third-most threes in the league. The Sacramento Kings have gone from the league's 7th-worst team to its 8th-best, thanks to the league's 3rd-best offense making the 5th-most threes per game.
Threes make defence impossible and make games come down to who makes the shots, which makes things higher-variance, the very things Terastallizing is accused of. While yes, the players obviously hit or miss the shots, the same could be said of Showdown players making or not making the Tera predictions.
So what's the NBA's solution? ESPN's Kevin Arnovitz (
https://www.espn.com/nba/insider/in...ba-insiders-say-all-3s-reaching-critical-mass) found some support for changes to the three-pointer in the 2021 offseason, with ideas including a cap on 3s per game and a proposal from Daryl Morey (whose Rockets became the 1st team ever to shoot more 3s than 2s in a season) to reduce the value of the shot to 2.5 points. Despite this,
the NBA did not opt to nerf 3-pointers. There were attempts to limit some of the 3-happiest stars, like James Harden and Damian Lillard, by changing the officiating to make it harder for them to draw fouls on certain plays. Overall,
the NBA, a professional league where billions of dollars hinge on being fair and competitive, considered a highly offensive, highly unpredictable metagame to be perfectly acceptable. This doesn't mean we (I say this like I'll ever ladder enough in a suspect to vote) can't rule differently, but IMO it's a strong point in favour of the idea that Tera forcing predictions and making defence way harder isn't necessarily uncompetitive.
TL;DR I'm in favour of Teras requiring items as a restriction, and at least one multibillion-dollar sports league is happy with having lots of offense and lots of unpredictability, which is IMO solid evidence that these things aren't inherently uncompetitive.