Nobody seemed to have a problem with it. It was largely clear what was a button and what was a checkbox. In hindsight it was certainly uglier than the 95 style (maybe just because I grew up with that) but it wasn't unusable at all. As you say, it was clear what was a button, what was a checkbox. I think it was because GUIs were mostly made out of standardized elements whereas today we have everyone trying to put their unique spin on every element.
We have to go all the way back to Windows 2 in before we find flatness.
[1] https://web.archive.org/web/20220418124401/https://techland....