I actually think that this is a threefold evolution for the series. On one hand, think the technical limitations of the Game Boy and the Game Boy Color influenced the design of the original regions. In addition to that, I think that the setting - regions based heavily on specific parts of Japan - played a role. Finally, I think that you're right that this was Game Freak's first true foray into actual region-building, and that shows in the thematic elements of the region.
As for the first part, I don't think you'll find a ton of games that include detailed overworld effects on the GB or GBC. It wouldn't actually have been possible for Gold, Silver, or Crystal - we know this because they had to invent an entirely new storage method in order to get those to fit on a single cartridge. That's not even considering the power it could take to process the overworld effects while walking around, or adapting the in-battle environment accordingly (since it would make little sense for, say, a sand storm to be present without an in-battle animation). All of these things became significantly more feasible with the jump to Game Boy Advance architecture.
As to the second, the setting on which these are originally based, I think that the particular parts of Japan we're considering have an impact on prior region design. Consider, for instance, the Kansai region of real-world Japan; it has a very similar environment to Johto, which is directly based on Kansai. Moreover, Ecruteak is a direct parallel to Kyoto, and Goldenrod to Osaka, with the thematic overtones of Johto being primarily cultural and directly paralleled with the Kansai region. In much the same vein, Kanto is based on and named after the real-world Kantō region; slightly more mountainous, a little more plain, and less concerned with the physical embodiment of Japanese culture.
When you get to Hoenn, then, it's no surprise to see tons and tons of water and a more dynamic physical environment. I'll get into how the designers took more creative liberty with Hoenn, but right now I want to focus on particular landmarks and comparisons with Kyushu, on which the island region was based. Kyushu notably contains Japan's most active volcano - think Mt. Chimney - along with hot springs and some sub-tropical areas. When you look at the region that way, it's clear how it compares to Hoenn's significantly more varied design, with dry and wet areas on land, appropriate weather, and lots of ocean area.
Finally, I'll restate that I think you're right that they made a much more deliberate effort to build this region, with the knowledge of Kyushu's environment and the hardware leap clearly in mind. The third generation was a surprise to Game Freak - they'd expected to end the series after the second, so in many ways this generation served as a second wind. Unlike the second generation, nothing about Hoenn had been planned in detail at the outset of the series' creation, since they didn't think they'd make a third one in the first place. That probably allowed them to be far more creative, and almost reinvent the series entirely besides the core mechanics at the heart of the game. You see this also reflected in Hoenn being the first region to attempt a more detailed plot, and having a somewhat larger cast of fleshed-out characters with unique designs and sprites.
Environmentally, this meant they could go a little wild. We see the creative range of the region in that it contains almost every basic type of environment there is. There's a cold, icy cave that changes its contents based on the time of day to reflect the tides of this oceanic region; there's a hot volcano and a surrounding locale full of ash; there are plain mountains; there are plains and open areas; there's a desert; there's a large rain forest; there's a few traditional forest areas. This great breadth of ideas reflects the technology's capabilities (rain, storms, ash, sand, etc); the actual environmental influence of Kyushu; and the freedom that a new, unplanned generation gave to the game's developers and designers. Everything came together to turn the series in a rather distinctly different direction than it had previously seen.
My apologies if this was very long-winded! The physical design and aesthetic of Hoenn had a huge impact on me creatively, and it's always been one of my favorite things. I was one of those nerds who about died (in a good way) when the DexNav in ORAS showcased the GBA style of each route. Getting to discuss the region itself at a little more length has been super cool! I could easily write a sequel post about how the themes of Hoenn and the music of Hoenn interact in really cool, interesting ways with the physical environment and micro-biomes.
