Once you enable that, it still only works on applications that explicitly declare support in their manifest.
The backwards compatibility here is only in the fine details of how you deal with long paths. The old way and the new way both require application support. The new way is easier, but the old way worked fine even on XP and earlier.
This setting isn't actually future-looking. It was already possible to make these files with certain tools. And they could have let it always be on for programs that support it. This setting exists so you can signal to programs that they shouldn't use long paths, even when they are capable of it.
> The file explorer does not support it on purpose.
Sure, it's on purpose, but it's a good example of how impotent the setting is.