The C64 was designed to be simple home computer and game machine aimed at 12-year-olds. For its purpose, I think it was the perfect machine. When they decided to make the C128, it really did not have a clear direction. The C64 had already maxed out the 64k address space and they just used an available video chip that they were working on for another project. In 1985, I would have liked a 65816 system at with 256k or 512k base memory and enhanced VIC and SID chips and a basic compiler like QBasic.It would have been fine if it is not C64 backwards compatible.
As for the Amiga, it is a much more powerful machine but comes at a much steeper learning curve. I ended up going to the PC about a year after owning one because programming for DOS was more simple.
If I was the CEO of Commodore, I would have released a 16 bit successor to the C64 instead of the C128 in 1985, still produced the Amiga but immediately released a console game system like the CD32 right after with unique titles.