The code running on the CPU is arguably the smaller problem when it comes to games: At least for consoles, they're often depending on very low-level GPU implementation details, especially for older titles and platform exclusives.
Older consoles had even more dedicated chips doing relevant stuff other than "simple" I/O, like e.g. the SNES's sound chip, which was a completely independent CPU running its own little programs in parallel with the CPU and GPU.
Of course you could "mandate" a high-level VM for all future game development, but given the static nature of console hardware specs, that wouldn't be competitive for titles wanting to make use of cutting-edge graphics.
Older consoles had even more dedicated chips doing relevant stuff other than "simple" I/O, like e.g. the SNES's sound chip, which was a completely independent CPU running its own little programs in parallel with the CPU and GPU.
Of course you could "mandate" a high-level VM for all future game development, but given the static nature of console hardware specs, that wouldn't be competitive for titles wanting to make use of cutting-edge graphics.