It just sounds like a big code-base fuckup. They more or less admit it: "Server side was disabled/gutted for years already, but this aspect was surprisingly forgotten."

Sounds like this was put in at one time, forgotten about, and the code lingered for a long time until someone pointed it out. SSH as a protocol is pretty crazy. Everyone loves it, but its a lot of things in one, which ironically goes against the unix philosophy. Its a remote terminal, a file transfer server, a network tunnel server, a socks server, etc. There's a lot of stuff in there and I imagine difficult to work with sometimes.

No word if this is enabled in Putty, but I imagine it is if its using openssh libraries.