Your question seems to propose the elimination of the "device driver" by "keeping" "control (of) the physical hardware ... inside the device controller". The premise for this seems to be:
kernel controls the physical hardware via device drivers.
That description of a device driver is something similar to what I've seem for end-user comprehension rather than from a developer's perspective. The end-user is aware of the device, and it is the device driver that takes that abstraction and can control that device down to the specific control bits of each device port.
But a device driver is responsible for mundane housekeeping tasks such as:
- maintaining device status and availability;
- configuring the device for operation;
- managing data flow, setting-up/tearing-down data transfers, copying data between user space and kernel space;
- handling interrupts and exceptions.
These tasks are integral to a device driver. These tasks cannot be transferred out of the purview of the kernel driver to a peripheral device.
Sometimes the device driver can only try to manage the device, rather than fully control it, for example, a NIC driver during a packet flood.
There is simply no possibility that you can eliminate a device driver no matter how much of "all this functionality is kept inside the device controller itself". And there would still be control directives/commands issued from the device driver to the peripheral.
The hardware device in question should be a computer peripheral device, not an autonomous robot device. The device should be designed to operate with a computer. Whatever interface there is between processor and device should be suitable for the task. If the peripheral is made more "intelligent", then perhaps the CPU can be unburdened and a high-level command interface can replace low-level sub-operation directives. But only "some" functionality can be transferred to the peripheral, not "all".