The real issue is case sensitive file systems. When do you actually want two files with the same name in different cases? That's not a human-centric design choice, Mac and Windows got this one right.
The real issue is somebody popularized this absolutely nonsensical idea that filesystems could be case-insensitive. They cannot. "A", "a" and "а" (Cyrillic) are different characters with different codepoints, whether you like it or not. Deal with it.
You can go around case sensitivity in user facing applications by using fuzzy search. Even command line tools can use Tab for autocompletion. Case for case sensitivity is not in ability to have two files which differ in case, but simplicity of underlying code that has to deal with paths.