Domain Expansion is Yuji's lose con
Dismantle this, Moon Spear that, Domain Expansion this, Gun Goddess that.
Let's take a break from discussing feats and stats, because characters are more than a sum of their battle kits.
Even though Death Battle acts on bloodlusted rules, in the end, preservation of character integrity is important too. "There's nothing stopping Yuji from reducing Denji into a mist of blood." There is.
Yuji himself. He's just not the type of person to chop a person into tiny little pieces. That's Sukuna' shtick. "But Mahito--" It's Mahito, the guy who killed his friend and his mentor and obviously has no good in him, nor is he worth redeeming. He also needed to have him chopped up quickly for Maru to use his Idle Transfiguration. And it's Modulo Yuji who is at a very different place in life.
Yuji has used Domain Expansion once. Exactly once. And what did he use it to do? He cut Sukuna out of Megumi. And what did he do before that? He tried to appeal to Sukuna to leave Megumi's body so he could harbor Sukuna for all eternity. That's right, he had so much mercy that he was willing to live with Sukuna for the rest of his life.
If Yuji had a way to defeat an opponent without smearing them into the pavement, that's the road he will take. If Yuji wins, it's by Black Flash.
Now, onto the reason all this is a lose con:
From Yuji's perspective, Pochita and Denji are in a similar situation as Megumi and Sukuna. From his point of view, he can defeat Chainsawman by cutting away the connection between the two, the same way he defeated Sukuna. To guarantee that lands, he'd use his Domain Expansion the singular way he used it before. For him to use it any other way would actually be an Itatheory.
He'd cut the two apart, and attempt to finish Pochita off by exorcising him. But like it has happened with Geto when he tried to obtain the Worm Curse from Toji, he'd be caught unaware that the bond between Denji and Pochita is a positive one, which would lead them to recombine. Remember, Curses and Devils share one trait in common: They are inherently evil. And Yuji who has chosen to dedicate his life to exorcising curses after living a life getting screwed by them would not foresee a positive relationship between a Curse (Devil) and a human.
Yuji hasn't shown he can lobotomize his brain to regain his burnt out technique, so he won't be able to use Domain Expansion again. And Domain Expansion is a very costly move that uses up all of one's cursed energy. Without any feats for cursed energy efficiency or output, all Yuji would have left are his fists. Alas, chainsaws have better reach.
TL;DR, anyone who wants Yuji to smear Denji against the pavement as a mist of blood doesn't truly love or appreciate his character. Yuji's own merciful personality turns the bond between Denji and Pochita into an oversight which becomes a grounds for him to waste his biggest trump card and all of his reserves.