Modern processors have a lot of optimizations that go beyond just doing math quickly. For example branch prediction allows them to act on information before its even known.

Also, 8086s could be made smaller to go faster and run more efficiently, but they’d still run into thermal limits. What you’re describing is basically the strategy behind the gigahertz race that happened in the early 2000s. Eventually just going smaller and faster wasn’t enough because you couldn’t get the heat out fast enough.

Finally, writing code for thousands of parallel processors would be a bear, and the memory limitations of a 16 bit processor would add a lot of overhead when trying to address the memory requirements of modern software.

Edit: sorry, forgot what sub I was in. Basically, a 16 bit processor just can’t address enough memory, and modern processors have a lot of clever tricks that go beyond just being smaller.