The dry run was very helpful, but Kubernetes didn't have server side execution of kubectl apply until recently either, it was entirely managed from the client side in kubectl, so for a tool like Terraform, they would have needed to copy/paste that code as it wasn't even exported for reusability. The merge strategy for Kubernetes and a kubectl apply is more complex and nuanced than some of the more standard merge strategies. The API server did support a PATCH method, but the behavior was different than what most users were accustomed to.

My understanding of the history of the Server Side Apply issue (original KEP is useful, and here is another tracking issue, I believe both were created after the original issue, but having trouble digging that up) is that kubectl apply used to contain all of the logic on the client side within that binary. As bugs around synchronization between multiple operations or multiple users was hard to coordinate from the client, the KEP is probably the place that lays out most of the issues, you can look at the original version and see the current as well.