> that doesn't translate to more expenditure that could be captured by the launch company.

Of course it does. With Starship, SpaceX could've charged NASA/ESA more to launch a bigger JWST than the cost to launch with Ariane 5, with huge profit margins.

On top of that, with a much larger fairing, you could almost certainly simplify the telescope and increase capability. A significant part of the JWST's complexity is the unfolding sequence, which could be simplified with a fairing that is more than double (triple? quadruple?) the volume.

> The question is whether those markets are not already adequately served by Falcon 9

What does that even mean? Almost every single Falcon 9 customer will prefer launching on Starship if/when it is available, because the cost will be much lower. A very small segment who have payloads that are exactly Falcon 9 sized and want a very particular orbit might still be better served by F9, but maybe not.

Beyond that, much lower cost unlocks previously untenable opportunities that you have not sufficiently imagined, as stated earlier.

> because there exists a useful upper to the size of payloads that companies actually want to ship to LEO in practice

This is only true because we are so completely beholden to the tyranny of the rocket equation with the current status quo. With the $/kg (and payload volume) that Starship would unlock, the entire ELO/GEO/Interplanetary/Deep Space market looks very different.

Labs in space. Hotels in space. Weapons in space. Much more interesting satellites in space. More government science missions. Privately funded science/research missions. etc