S3 was well aware of the pain when I was there ~10 years ago, just considered themselves handcuffed by the decisions made before the idea of a cloud was barely a twinkle in a few people's eyes, and even the idea of this kind of scale of operation wasn't seen as even remotely probable. The namespace issue is one of a whole long list of things S3 engineers wish they could change, including things like HTTP status code behaviour etc.

I've never really understood S3's determination not to have a v2 API. Yes, the V1 would need to stick around for a long time, but there's ways to encourage a migration, such as having all future value-add on the V2, and maybe eventually doing marginal increases in v1 API costs to cover the dev work involved in maintaining the legacy API. Instead they've just let themselves, and their customers, deal with avoidable pain.