Two advantages I see to files in folders are the ability to browse and the ability to easily read - by both LLMs and humans.

But I also agree that this has limitations. If I were to challenge you and say that Obsidian solves this, or gets close to solving it, what gaps would you say were left unfulfilled?

I am because I'm working on something in this space and your comment touches on my three main ingredients: text files, SQLite, and graphs.