I'd buy this except we have existence proof of how Apple solved this by instead making .app folders act special in the UI and having an /Applications folder you drag applications into.

A much more elegant solution and I think the criticism stands correct; Microsoft Research just didn't realize how to solve the problem and everything else is justification after-the-fact.

I remember when you’d look in that folder in old versions of Windows, explorer would actually tell you, “Hey, don’t look in here!”

This was because they hadn’t yet implemented security. (Was probably Win98 or so.)