People who name their folders "Documents and images from the conference in August with CEO" deserve what they get.
Although 260 characters does seem like the Excel team think more like me than the rest of (more reasonable) MS.
I'm surprised you can't imagine working on a path that deep. Path arrangements are frequently thrust upon you in work environments and if you have a lot of work (or a lot of people sharing the same folder hierarchy), you may need a deep path structure to keep it organized. Attacking people as "masochists" because their paths are difficult to type seems unfair.
As for your example though, Windows usually shortens path components longer than 8 characters as the path gets longer (so "Program Files" becomes "PROGRA~1") so long single components aren't as problematic as many shorter components.
Earlier DOS FS (and others) were sometimes limited to 8 characters + 3 for extension and Windows just used to shorten filenames when writing to those FS. But to these days it still causes some problems for legacy software and you might see some PROGRA~1 hanging around but it's not from the OS, it's from the application (or its old out-date API for FS access) doing the shortening to fit the long filename it was given into an 8 characters word it thinks the FS can handle.
Windows's file explorer or file picker doesn't shorten path or filenames when downloading long filename from the web for instance (via Firefox or IE).
In short, paths that deep show you have humans trying to do what computers are better at. Schumpter will be round later to have a word.
C:\users\myusername\work - good.
C:\users\myusername\work\projectname1\ - still good.
Now checkout here the root of your favorite SCM from a project with 30+ developers.
There's a good chance that you'll run into problems.
/rant
Or wait, let's do it the Unix way! Isn't "etc" obviously "configuration"? And "bin" obviously "programs"? Yes, let's all use short, non-intelligible folder names like they used back in the days of teletypes when we have 24+" monitors. And let's add on top of that some inside jokes from Bell Labs or Berkeley while we're at it ("spawning daemons").
Yes its freaking annoying, but I think having a path > 260 chars or a need to pass 5000+ bytes in as line arguments all count as "code smells".
If you are hitting these issues, something else is wrong and in my experience, fixing the other things is much much more productive.