Earlier quoted context omitted.
The OS should always be in service of the user. And users (in my experience) vastly prefer case insensitivity. Sorry, but there's just no way around it.
Users shouldn't have access to the filesystem. The usability issues are too significant even for competent users. A good laugh/example: http://xkcd.com/1459/
The length at which I have to go to remember how to get stuff onto an ipad through itunes is an exercise that always reminds me that I always want access to the filesystem, even if I don't normally use it.