Could MetaMask generate hundreds of addresses from a unique seed phrase to protect privacy?

The current situation is that all transactions and calls are made from the same 0x address, therefore corrupt governments or bad actors could end up identifying who is behind the address and all its movements. However, if MetaMask (or similar) had a bunch of addresses generated from a seed phrase and used a unique one for every transaction or smart contract call, we would remove a lot of privacy issues on Ethereum. Besides, there should be a function to blend the funds of multiple addresses (ignoring high fees).

So, could this be possible? Also, does Ethereum allow multiple addresses to participate in a transaction, whether it is as input or output?