I'd argue that being able to write to and read from storage for the lifetime of the session (i.e. until you close the tab) is not "persistence" in the sense tha

I'd argue that being able to write to and read from storage for the lifetime of the session (i.e. until you close the tab) is not "persistence" in the sense that any privacy-conscious user cares about. If anything, making these features break loudly enables sites to detect that they can't be used for persistence and allows them to find ways to circumvent that. Contrast this with cookies which are silently discarded if the server sends them anyway. It's not at all surprising that Google's browser would chose a way to loudly break these features in a way that a) allows sites to detect that they're unavailable and b) discourages users from using this setting. This reminds me of when third-party Android releases would add a way to fake sensor data (e.g. GPS) when denying permissions to apps so the apps wouldn't be able to lock out users unwilling to agree to those permissions. A feature that of course Google would never add to stock Android as it is important for their business model that apps can trust their tracking data to be genuine.