There's a good reason why Apple aren't making the small form factor phone lots of you are asking for: logistics.
The new SE requires very little new manufacturing capacity. The case and probably battery are from the iPhone 8; the CPU/GPU/SOC and most of the rest of the electronics are from the iPhone 11; the camera still seems to be a slightly unknown quantity but the specs suggest it has a lot in common with the iPhone X camera. No doubt a certain amount of tricky engineering was required to put those parts together efficiently, but the SE requires almost no new manufacturing capacity beyond the final assembly line. For Apple it's pretty much a no-brainer.
A hypothetical "iPhone Classic", with modern innards in an iPhone 4/5 form factor case, would be a very different matter. You couldn't combine the 11's CPU with the 5's battery - battery life would be laughable. So you'd need to use a CPU from an earlier model; I suspect you'd have to go back at least to the 8 to find a CPU that doesn't drain an iPhone 5 size battery like water through a sieve. That means keeping one more CPU fabrication line in business beyond its intended life, taking that capacity away from the plants that are making silicon for the iPhone 11 and the coming 12. The camera would of course also have to be based on an earlier model, with all the same downsides again in terms of keeping old technology going and taking up factory capacity. And fitting all that into a 4/5 case would still be a much bigger engineering feat than the actual SE 2.
Bottom line: Even if you assume that the "iPhone Classic" market would be as big as that for the SE 2, it's hard to see how it would be worth Apple's time and money to cater to it. If you want to argue that the Classic would be a practical proposition for Apple, you would have to claim that the Classic market would be much bigger than the SE 2 - and given how popular the SE 2 is already turning out to be, that seems really unlikely.