I cannot 100% confirm this, but I believe AWS insisted a lot in NOT using S3 as a file system. Why the change now?

It appears that they put an actual file system in front of S3 (AWS EFS basically) and then perform transparent syncing. The blog post discusses a lot of caveats (consistency, for example) or object namings (incosistencies are emitted as events to customers).

Having been a fan of S3 for such a long time, I'm really a fan of the design. It's a good compromise and kudos to whoever managed to push through the design.

Because people will use it as filesystem regardless of the original intent because it is very convenient abstraction. So might as well do it in optimal and supported way I guess ?

People and by people I mean architects and lead devs at big account orgs ( $$$ ) have been using S3 as a filesystem as one of the backbones of their usually wacky mega complex projects.

So there always been a pressure to AWS make it work like that. I suspect the amount of support tickets AWS receives related to "My S3 backed project is slow/fails sometimes/run into AWS limits (like the max number of buckets per account)" and "Why don't.." questions in the design phase which many times AWS people are in the room, serve as enough of a long applied pressure to overcome technical limitations of S3.

I'm not a fan of this type of "let's put a fresh coat on top of it and pretend it's something that fundamentally is not" abstractions. But I suspect here is a case of social pressure turbo charged by $$$.

I think it opens them up to a huge customer base of less technically apt people who just downloaded some random "S3asYourFS.exe" program but also opens them up to needing to support that functionality and field support calls from less technically apt people. I don't know if that business decision makes sense (since AWS already lacks the CS infrastructure to even deal with professional clients) but the idea that you could get everyone and their brother paying monthly fees to AWS is likely too tempting of a fruit to pass up.

They found a way to make money on it by putting a cache in front of it. Less load for them, better performance for you. Maybe you save money, maybe you dont.

Because without significant engineering effort (see the blog post), the mismatch between object store semantics and file semantics mean you will probably Have A Bad Time. In much earlier eras of S3, there were also some implementation specifics like throughput limits based on key prefixes (that one vanished circa 2016) that made it even worse to use for hierarchical directory shapes.

This is how tech people think, but Customer still want this, so it will be built, eventually