It's not quite as black-and-white as many people imagine. many ideals of the classical era were beginning to materialize during the last half of the baroque era, and it was a slower transition than it is often made out to be. there are several main factors which caused the stylistic shift. they are not limited to, but most certainly include:
Instrument development - as you've noticed, there were big changes going on in instrument technology during the time. The piano, though already invented by the end of the baroque period, was undergoing practical development in order to become a more functional instrument. Part of that includes action mechanisms capable of more virtuosic playing, and structural developments to allow it to be more capable of higher string tension resulting in higher potential volume output so that it could stand up to the forces of larger orchestras. The violin was also undergoing changes, namely development in bow structure and lengthening of the neck/fingerboard, in order to accommodate higher tension and higher volume output, resulting in a stronger, more brilliant tone. The classical period is also marked by the invention of the clarinet, which was developed from the concept of the chalumeau of the baroque era. These are not the only instrument developments which were going on at the time, but they're arguably the most notable.
The Age of Enlightenment - During this era (end of Baroque through the Classical era), there was a large shift in the social classes, resulting in a massively increased middle class. As a direct result of this, the audience of music shifted from predominantly royalty to both royalty and common citizens. This explains many aspects of the music of the time - the focus on complex counterpoint was shifted to a focus on "melody with accompaniment", catchy tunes, simple harmonic progressions, and impressive virtuosity on the part of the performer rather than on carefully executed contrapuntal integrity - things the general public could grasp and appreciate. The Age of Enlightenment was also marked by an idealization of classic Greek art, architecture, and culture. The operatic scene of the time witnessed an increase in the prominence of the "opera seria", or serious opera concerned with themes of Greek mythology, and focused on characters' moral development, rather than more comedic themes. Also adopted from the Greek culture was the idea of the Greek tradition of orally presented drama, spoken or sung by a single person, accompanied by a lyre or another such instrument. This is another factor in the development of the "melody with accompaniment" aspect of Classical music, originally a feature of later Baroque opera, and then subsequently adopted in the realm of chamber music.
Obviously, there were more factors than just two at play in the transition from Baroque to Classical, but those are (I think) the ones which affected music the greatest. But yes, you are right on track with what you said, and I would add to the list more emphasis on virtuosity, simpler harmonic progressions, more emphasis on a clear and catchy melodic line than all other voices, the development of sonata-allegro form, and larger audiences, resulting in a need for greater dynamic force in instruments.