The problem is getting a compact throttlable rocket engine. While you can throttle solid rocket motors[0], the solid rocket motors you can buy at your local hobby shop would not be very good for this, as they don't burn for very long. Hybrid rocket engines might be the thing to use for this and amateurs have built such things[1].
Sounds like something SpaceX should sell. Maybe there's some value for them in miniaturizing the technology, and the small profit from the model rockets could offset the cost a bit? Or maybe just look at it as PR?
Edit: I was very much under the impression that there were concrete regulations against private individuals using active guidance on model rockets, but after searching around, I can't find any such thing. Goes to show, trust but verify, including your own memories.
Active guidance on anything rocket-propelled is strictly prohibited/regulated by federal law.
This is widely believed, but not true. Here's a nice example of a small model rocket with active guidance.[1] It's launched at a 45 degree angle and then corrects to vertical. After beginning descent, it pops a parachute and lands safely. Built by a 13 year old girl.
For rockets above a certain size, you have to start talking to FAA air traffic control, and they're going to insist that you operate in some unpopulated area.
But that's not about whether it has guidance technology.
They're tons of fun but yeah, there's a reason they are done way out in the middle of nowhere.
My favorite was when you'd get a false start, enough to get you off the launch rod and flop onto the ground right as the main motor took off. We called those land sharks.
