I don't specifically remember whether there were other motivations for that requirement. Possibly a desire to support "tag" style interfaces, where an item can have multiple tags applied. But it may have mostly been the Photos integration.
And no, definitely the complication was not worth it in the long run. :-) That project got way more complicated than anyone wanted (not that there's anything unusual about that).
I actually remember early Google Drive to have only tags for files, and no folders. Apparently, the idea was to distance from the file tree paradigm, but eventually the traditional approach proved to be more user friendly.
And no, definitely the complication was not worth it in the long run. :-) That project got way more complicated than anyone wanted (not that there's anything unusual about that).