My question would be can't the netcode be improved to prevent this in the first place? The fact that all players receive full game state enables this. In the early 2000s this made sense. Does it still today?
That will only protect you against wall hacks. This is a strategy known as fog of war. The server will not send the positions of players far from you. However, you still need to send the positions of players near you, but still behind walls, otherwise lag compensation won't work properly.
This doesn't protect you against trigger bots (shoot automatically when you put your mouse on a target), aim bots (snap to targets, ranging from obvious hacks to very minute adjustments), and others.
That's already done entirely server side. It could only be. If you mean predictive positioning from the client side you can do that with far less state than gets transmitted today, and you could factor in the other players momentum on the server side to see if prediction would even be necessary in a given frame or not.
The server could also send lots of phantom updates so the player client has no idea which objects are real and which aren't. The hacks could work around this but it would take a lot of power to do so. There's room for asymmetric counterhacks here.
As for the other types of bots those are far less useful and more detectable by naked eye without wallhacks, which ironically, is because lag compensation is server side, these hacks do not have a deterministic outcome when used.
When you look at a video of what a wallhack enables and how much state data gets transmitted that shouldn't be, I would be embarrassed to have such unworthy netcode in the 2020s. They've had 20 years and have done next to nothing.
