This seems to be a "bug or feature" situation where the answer depends on the user profile. The ability for messages to leave the Signal app in plaintext SMS is a "feature" for users whose top needs include a single-app UX, and a "bug" for users whose top needs include an app that is foolproof E2EE (so users don't have to consciously pay attention to which conversations are Signal-native vs SMS). Maybe SMS support could be an opt-in feature, to accommodate both groups?
From my perspective (and I am NOT speaking for anybody else) this is an improvement. I already have multiple messaging apps installed, and when I click send on a Signal message I expect it to go end-to-end encrypted or not go at all. But I am not the only user profile.