Been there, done that. People think it's awesome to create a bunch of long, nested directory names, until the fully qualified file name becomes too long for max path and automation starts breaking.
Spot on. The problem for me is that in some software (Visual Studio) it breaks and other software (MSBuild) it works so you get inconsistent issues. In my case, it dies when building VS solutions (vs.net is win32) on disk but not using MSBuild (win64 platform).
Basically software dev breaks something by creating long file name (which if you ask me is fine) yet the integration tests succeed.