Practically? Quite a few codebases from *nix systems rely on the case sensitivity. To do a successful git clone you need a file system that handles both Makefile and makefile, or whatever.

I ran into it more than once back in the day when I used Mac OS X as my primary OS.

More generally -- case sensitivity is a conceptual nightmare in the Unicode era. Should Cyrillic or Greek be case-insensitive as well? Etc. Do you really want the full complexity of Unicode string handling in your file system?

I would suggest treating file names like raw bytes. On modern Linux, anything but NUL is valid.