Potential reasons I can think of for why they don't disallow name reuse:

a) AWS will need to maintain a database of all historical bucket names to know what to disallow. This is hard per region and even harder globally. Its easier to know what is currently in use rather know what has been used historically.

b) Even if they maintained a database of all historically used bucket names, then the latency to query if something exists in it may be large enough to be annoying during bucket creation process. Knowing AWS, they'll charge you for every 1000 requests for "checking if bucket name exists" :p

c) AWS builds many of its own services on S3 (as indicated in the article) and I can imagine there may be many of their internal services that just rely on existing behaviour i.e. allowing for re-creating the same bucket name.

I can't accept a) or b). They already need to keep a database of all existing bucket names globally, and they already need to check this on bucket creation. Adding a flag on deleted doesn't seem like a big loss.

As for c), I assume it's not just AWS relying on this behaviour. https://xkcd.com/1172/