I hear what you're saying, and the institutionalisation of people was so very wrong.
I was heavily involved when Community Care (Care in the Community) legislation was implemented. Particularly in sourcing alternative living situations for those being discharged from NHS care.
The vast, vast majority of residents had either a diagnosis of Down Syndrome, Cerebral Palsy or physical disabilities. Those people were relocated to the type of home situation you describe - houses in local communities with on-site support (sheltered housing situation) to allow them to live as independent life as they were (individually) able. Some were allocated their own tenancies (or shared tenancies) with care workers visiting multiple times per day and sometimes someone sleeping over too. We did our absolute best to meet the individual's needs/capabilities in discussion with them and their families.
The minority of residents had diagnoses of Autism. Only a handful of those people were assessed as being capable (with substantial support) of living in even a semi-independent situation. The majority (of the minority) went to a combination of private and NHS residential units where there was no expectation of independent living. Those units were (are) much smaller, much more homely than the 'asylums' in which they previously lived but retain a 'structured' ambience. Interestingly, families (where they were still involved) were very supportive of ongoing full-time care for their loved one where it was suggested to them.
I'll be honest, I have zero idea of how many of those people would be in mainstream education these days. I suspect those with Cerebral Palsy or physical disabilities would definitely be in mainstream school now without question. No-one seems to mention Down Syndrome pupils in my social sphere, so I imagine those pupils work quietly/dilligently and are not disruptive. There is, though. a lot of anecdotal evidence of pupils with Autism/ADD/ADHD in mainstream classes. Unfortunately, usually that anecdata is negative in terms of disruption to fellow pupils and the trauma experienced by those pupils when the pupil with Autism etc. has multiple meltdowns on a daily basis. I'm sure, though, many of the pupils with these diagnoses are 'quiet' in their symptoms and battle through just as they would have (back in the day) without the diagnosis but with the same feelings/anxieties/behaviours/triggers.
FWIW, I'm sad I grew up in a era when people with disabilities were, for the most part, hidden away and recognise as a society we failed those people.
However, I'll be honest, I'm also grateful that I was not traumatised by witnessing multiple violent/emotionally distressing meltdowns on a daily basis. The most 'unusual' event I/we witnessed were fellow pupils who had an accident being despatched to the school nurse, or someone crying because they'd fallen out with their best friend.
For me, that's the massively under-discussed issue - the trauma/impact on children witnessing these events - teachers/fellow pupils being punched, kicked, spat on, being hit with flying objects or the deep distress of the affected pupil - in someone who has been triggered into a meltdown due to noise/lights/not wanting to take off their jumper/sitting in their own excrement for too long etc.
Are we at risk of creating a generation of people with PTSD from being required (without option/discussion/agency) to witness these events? Living on their nerves waiting on the next meltdown and having zero inclination when/how that will occur? Having no idea if they will be in the physical firing line, receive a blow to the head or be hit with a flying chair? Isn't that how victims/the children of DV live?
Of course, all of that, is before we look at the impact on their education due to so much time lost with the teacher doing their best to mitigate/handle the meltdowns. I often wonder if there is correlation between declining mainstream educational standards and the time teachers have to spend handling pupils who are ND?
I don't know the answers to any of it, but I certainly hope those with the appropriate qualifications/research ability are looking at the situation with a wide-angled lens and not focused solely on what is best for the ND child/ren.