I think people would be willing to accept 4 or 6 cylinder AMGs in some contexts (for instance, the C36 has a cult following and the A/GLA AMGs seem to do ok), but you can't just slap a "63" badge on a 2000cc engine, package it as a flagship product, and expect people not to notice.
I suppose with the A-Class no one really expects a 'Golf' segment car to have anything more than a 2ltr turbo four-pot. Plus its a much younger market who just yearn after hp bragging rights. The C36 was the start of the hot C-classes, but they quickly shifted onto V8's. Going back to a four-pot feels like being short-changed. Had they used the previous-gen's C43 V6 engine as a hybrid starting point instead it might have been more palatable for those with memories of the W202 C36.
I think performance creep is partially responsible for all the nuttiness. I wonder if instead of trying to make a 4 cylinder produce nearly 700hp while being simultaneously what nobody wants and unnecessarily powerful, if AMG could have used those resources to develop a 500hp 6.2L NA V8 to be just as environmentally friendly (I mean, it's dubious that the former is actually more environmentally friendly considering it still only gets 20mpg average and has most of the other impacts of an EV, like increased wear on consumables, battery production environmental costs, etc) Last time I checked, 500hp is still absolutely incredible in a street car, particularly if it's not pushing around a literal ton of batteries. GM has developed a pretty decent cylinder deactivation tech for it's own 6.2L, enabling it to get about the same fuel economy as the C63 when installed in a pickup truck....and I seem to remember AMG themselves was working on similar tech. If they want to be relevant, they need to provide a unique selling proposition, and that is an N/A V8 in a well built European package.
