As someone who writes blogs in his free time, I would love to improve the small blog ecosystem and increase engagement.
That said, I don't think Kagi's business model cares about "more engagement" since Kagi isn't serving ads - unless the goal is to paywall the blogs (giving users a reason to pay for Kagi) - which feels like Medium and other Freemium blogging platforms. If this is purely about improving the index for Kagi users, then supporting a spec like https://www.indexnow.org might provide a larger uplift.
It should also be noted that a lot of blog writers (at least in my space) want to avoid hosted blogging platforms, because they lose control of their content. I only see this benefiting the smallest of blog writers (see https://kristoff.it/blog/static-site-paradox/) who may quickly out-grow the need to host on Kagi.
Another worry is that many blogs are rather niche, so Kagi hosted blogs might only benefit "low hanging fruit" topics, or popular/trending topics (the reason why so many Youtube videos reference things like Minecraft/Roblox/PUBG/etc, even when completely irrelevant). If you give people a problem, they will gamify it (e.g. SEO will become a problem eventually).
I would also worry about Kagi prioritizing it's own content (user generated, or otherwise) - which is legally dubious. Hosting any kind of user-generated content is also increasingly becoming a liability (see Instagram, Facebook, etc.).