I doubt Intel would like to lose profit, market share and their face. But whether this direction makes sense, I think only time will tell. The problem is, while you can hire back the finest ex-employees or external hires, it does not always translate to a great product every time.
My take on TSMC's 3nm is that they will probably reserve it for high margin products, so don't expect to see it on your everyday system. The problem is the cost is prohibitively high and usually only Apple have the deep pockets to tap on the most cutting edge node year after year. And they are selling these SOCs based on cutting edge nodes to retail, but of course they also charge a very steep premium for them. In addition, Intel probably have to compete with Apple to get some allocation for the node, and being a lesser priority customer (since they are also a competing fab), they likely have to pay the full fat price, as compared to Apple which is more like a strategic partner for TSMC.