I'm not sure that it's completely bizarre. Dropbox will work on case-sensitive file systems, but it does very strange things if two files exist with the same name, but different case.
I suspect MS just didn't want to deal with this complexity for what was (perceived) to be an issue for a relatively small number of people.
To be clear, I don't necessarily agree with their reasoning, but I do see where it could have come from.
> I suspect MS just didn't want to deal with this complexity
Case-sensitive filesystems are probably much simpler than case-insensitive ones that have to preserve case when a file is saved or renamed but ignore it when the file is opened.
I suspect MS just didn't want to deal with this complexity for what was (perceived) to be an issue for a relatively small number of people.
To be clear, I don't necessarily agree with their reasoning, but I do see where it could have come from.