You’re talking about economies of scale and marketing reach, and yes big rpg publishes like WotC and Paizo absolutely benefit from that. But let’s be realistic — they are not representative of the industry, most of which is a hundred times or more smaller. A small company often literally can’t sell a couple of hundred books, let alone a hundred thousand. There’s no magic wand (Kickstarter is the closest thing to one).
Yep. It's super hard for smaller publishers to come close to paying reasonable rates because the sales volume is so small. Just throwing numbers out there:
Assume a 175,000 word book (that's about 300 pages)
$0.07 a word for writing = $12,500
Editing = $2000
black and white art = $150 per page, average 1 full page every 8 pages (or 1/4 page every other page) = $5500
color interior art = $500 per page, average 1 full page every 8 pages (or 1/4 page every other page) = $20,000
Cover = $500-$1000
layout $10 per page = $3000
To put out a professional looking book, you're spending $23,500 for a black and white interior, $38,500 for a full color interior book.
If you manage to sell 500 of them (which is a great amount for a small timer), using a channel like DTRPG (which takes 30% if you're exclusive) at an MSRP of $49.00 and print&shipping is $16, that nets you $9,100. Most indie small time publishers are lucky to sell half that, so let's round to $5000. Just to break even, you gotta look at that cost list above and decide what you're not paying for.
The small time publisher (and most medium sized ones), will have to rely on stock art, which these days is
much better than it was 10 years ago in quality and quantity. That saves you a lot of money, but the danger in that is that your book starts to look like every other book. And most indie publishers do their own writing and layout (too many do their own editing as well--yikes; that's the one thing I wouldn't skimp on, speaking from experience).
Those rates above are pretty industry standard average for decent quality, and we all agree that industry standard is probably too low.
As you say, kickstarter is really the only tool that allows a small timer to put out a professional looking book unless it's funded personally by the creator (which is what I do).
My recent Chromatic Dungeons book that ended last month raised just over $10,000 on KS. After costs (and I did use stock art as well as privately commissioned stuff, and did my own writing and layout), I broke even. That was black and white interior. The art budget was $5000 and editing was $2000, and other costs ate up the rest.
The project I'm working on now is full color interior, and my allotted art budget is over $20,000. That's just art. I'm guessing your art budget for Level Up is significantly more. I'm hoping my new project will be more successful than my Chromatic Dungeons was

(I think so, since this new one is 5e compatible and not OSR). I'm pretty sure you'll make a tidy sum on Level UP due to the money you've been able to invest in it (top quality looking books), and due to having a large platform. But for the average indie publisher, doing a project like that is simply out of reach. I'm just now at a point where I can start investing decent money into projects.
Which circles back to the point: it's hard for writers and artists to make a living in this industry because most publishers outside of the big names can't afford to hire them.