I get 406 Not Acceptable over there, but ... yes, the whole Envoy-sidecar-per-Pod thing is heavy in latency, management, and userspace processing overhead.

Istio is already shrinking this overhead ... a bit ... with Ambient Mesh: https://istio.io/latest/blog/2022/get-started-ambient/

... but in the end I expect this all to happen in the kernel.