Why do they design pressure gauges like this? Is it because the sensor can't reliably sense differences between 0-10 PSI?
Yes. that is correct.
most sensors, guages, scales etc. have a "sweet" spot where they're reliable. The sweet spot is the range where its accurate. Outside that range, the measurements are terrible, why bother having hash marks there?
I work with a lot of instruments. Most people I train fail to get that an instrument that can read close to zero accurately is going to suck at reading something large; for a rule of thumb the sweet spot is 10-90% of the range on the instrument. It works with weights, pressures, temps etc., don't go to the extreme high or low of your tools, its better to switch tools, instrument, devices etc.
The mechanical design is just too hard, imagine a sensor thats extemely sensitive for low ranges but also super strong for high ranges, thats a tall order to build. Its far easier to build stuff extremely sensitive OR extemely strong, theres no such thing as a tool that does everything the best.
Also note, zero is an artificial limit. I have guages that have negative presures, zero is just a place holder and not an absolute limit. Instruments that force a zero reading are generally lower quality, when they read under zero you can tell if the calibration is off.