You can't gen in something that doesn't exist, tho. Couldn't gen a functional Chikorita in LGPE, since they blocked it (became bad egg). If they really don't program in various stats and data for the missing Pokémon, the only way around it is some super convoluted ROM hack...
Yup, for the "new direction" portion, the word Masuda used was indeed "Houshin", which (google) translates to Policy.
When you think of it being a "company wanting to follow a new direction", it does sound like "company policy", so the translation fits.
I was thinking they intend to make HOME a place where hoarders can hoard all their favorite Pokémon, but moving forward, only the "best selection of Pokémon to match the setting of the adventure".
I have conflicted feelings about this. I personally think it is a terrifying prospect (and this cannot be understated), however I have to acknowledge the fact that I didn't use all 800+ Pokémon in SM and USUM. They were mostly just.. there as a living dex. le sigh.