I wonder if it's related to the fact that Windows as such weird rules about allowed file names. Like not directly obviously, more like culturally inside microsoft.

I would not dismiss something like that directly being the cause. Not the reason you can't name a file "CON" on Windows, but it's very likely some weird ass thing they were stringing together with Windows Server and Hyper-V and SMB backed them into the corner we're all in now

I’m pretty sure Azure was built out with Hyper-V, which was built into the Windows kernel. So everything that relied on virtualization would’ve had bizarre case insensitivity and naming rules.

I’ve lost track of servers in Azure because the name suddenly changed to all uppercase ave their search is case sensitive but whatever back-end isn’t.