There were also financial reasons not to, just as there were with the Ottoman Empire in Eastern Europe -- Islamic law says that no Muslim can be taxed more than a non-Muslim so non-Muslims were handy to have around because they could be taxed more.

That's nuanced, they were always challenged every few decades, from Marathas to Ahoms in North East. Fighting with all Hindu princely state instead of making them ally would've surely might have been counter productive. While it was their intention to Islamise, and many did, but it was impossible without an extremely cultural backlash that they also feared.

like arguing Hitler could have killed all the Jews but was nice enough to let some escape