(Hi shoggoth, and welcome! A 32-bit address bus in a 40DIP would indeed be quiet something!)
I agree that this datasheet, while very interesting, looks very much like a rush job, and isn't entirely consistent.
Interesting possibility that the '832 might have only been an update to the arithmetic and register width, not the address width. As you say, rpiguy2, that would help 32 bit operations, so operations on integers and on pointers, both the speed and the code density, but with only quite a minor change to the architecture. More like an '816plus than an '832. WDC had (and have) such limited resources that small tweaks which add a reasonable amount of value must be very attractive to them.
And 16Mbyte of addressable memory, at that time, would have seemed plenty. AFAICT, the 68000 had the same restriction, and the ARM1 went only to 26 bits.
It might be worth reading over some previous threads too:
Unfortunately I think there are some dead links within.