The thing that I don't like of the WSL2 is that is just a VM, but a VM that is very limited. For example working in the embedded development field I often need to use serial ports or USB devices, a thing that the WSL2 is not capable of doing (unless passing trough USB/IP that has its compatibility issues especially for stuff like debuggers needing precise timing), and that the WSL1 was at least for the serial ports able to do. This is a limitation that doesn't allow me to use the WSL. Same thing with all kind of other software that wants to access peripherals of the machine natively (e.g. a GPU for example, or another PCI card, something that to be fair is not even doable as far as I know with hypervisors on Windows but completely doable with hypervisors running on a Linux OS where trough the IO MMU you can share any PCI device of the host to the VM).
WSL1 was a great idea, bad thing that Microsoft abandoned it for something that is just good for web application development.
Over time this would tie the Windows kernel’s requirements so that they matched the Linux kernel’s due to expectations from WSL1 users. This of course is a bad idea for any engineering organization - you will have requirements imposed on you that don’t mesh well with your other non-WSL users and you also have no real sway over Linux governance. This would lead to the Windows kernel either becoming a clone of Linux or serving at least one set of users poorly.
NTFS does not have performance problems. The difference between DevDrive, which uses ReFS (arguably a more 'resilient' file system than NTFS due to journaling) and a standard NTFS volume is the file system filters are either removed or in the case of Defender, put in async mode.
The file system filter architecture is the performance problem, not the file systems. It's a trade off to have a more extensible I/O stack.
I also don't remember why they couldn't just bypass the filter stack for paths in a certain volume - WSL2-like I/O on WSL1 - but there must have been a reason.
Maybe this works out better because Linux is more flexible, while Windows/NT is more "set in its ways" and therefore more difficult to implement Linux on top of... Maybe?
Since git and nodejs are both common in modern development and are expected to work efficiently with huge numbers of files, this was a real bottleneck and it couldn't easily be tackled without threatening backward compatibility.