Yes I do agree with you. This is a limitation for now, and something we will absolutely keep thinking about.
The big reason why I chose not to convert historical topics in a category when it is enabled, is that users are likely going to interact differently. In flat mode, the various Reply buttons don’t matter as much. The post is going at the bottom of the topic. I’m not sure users always intentionally press the “right one” that would translate to the nested view.
Basically I worry that admins will enable it for historical topics and then suddenly the conversation is unreadable. We’ll keep thinking about it. The easiest change I can think of is when the category setting is toggled, we have a modal popup saying “do you want to apply this to existing topics?”