The reason on-chain SVGs matter is not why most people think. It's not just that they live on-chain with no dependencies, or that they have stronger guarantees of being around for a long time.
An item whose render function generates an SVG each time it's called doesn't need to return the same thing every time. The NFT itself can read any on-chain data and use it to decide how it should appear to its owner in the moment. It can look up relevant state changes, user actions, and external activity, and then display them either as literal information or as abstract visual characteristics. This allows the NFT to provide much stronger affordances to its holder as to its functional purpose.