It’d be cool if the algorithm used tried to diversify the shown games
It does do that. But only to a degree. The real problem is, that people start browse on "popular", instead of a recommended page or the landing page. The link to the landing page is hidden in plain sight. It is the Itch icon left of browse. And that one has the featured section and a "fresh" section and all that.
But popular, by definition, should be the popular ranking. And faking it for the sake of "diversity" would be blatant manipulation. Horror is popular, immensly so in the indie sector. I blame all the youtubers.