I remember 128KB being an issue past mid 2007, which is when that patch was merged. I think that the compression trick actually happened a bit after that. Looking at the patch, it appears that yes, it's one of the temporary hacks I was referring to. It did add some breathing room, because it no longer constrains the aggregate of argv plus the environment, but it keeps 128KB as the max size for each flag, which was still problematic for good old GFE and its service list. I can't remember if they managed to implement external flag files first or if they had to resort to --flag, --flag2, as web folks do nowadays to work around e.g. cookie limits (I'm looking at you, oauth2-proxy, embedding massive claims).

My only guess is that it plays badly with borg run somehow but having the borg cli autogenerate a flagfile seems uncomplicated.

Edit: Although there's arguably security implications to letting me push a file from my workstation, but that wouldn't have been an issue in 2006.