XMPP Works fine when it's setup or when you don't manage the hosting, but God is it painful to self host an xmpp server.

I recommend you use snikket if you're having trouble selecting plugins, because it has everything you need out of the box and its super easy to setup.

It even needs a special setup to work on restricted networks via port 80/443 because it wants port 5222 and 5223,

Isn't that just a configuration in prosody / snikket? What implementation did you use that didn't let you configure this? Or are you expecting major implementations to default to port 80/443? Because that would be quite problematic.

Most basic communication features in 2024 such as replies reactions quoting threads etc.etc. are unsupported ootb, and you need both a client that supports the extensions (often very slow to adapt "new" standards AND a server that has enabled the plugin for that feature.

This is already supported by the major clients. I know for sure that conversations on android (and I suppose the many clients based on it) supports it. For server implementations, it is available out of the box on snikket, and it is a plugin you have to enable on prosody.