I’m not one of the Discourse team so I’m only repeating what I’ve seen.
There has been more than one reason given for the current default. The reasons I remember seeing here are:
- provide control of this feature for the site owner
- prevent elongated images dominating by taking too much space vertically
- prevent elongated images becoming horizontal slivers or breaks
- provide legible previews
- discourage unusual unoptimized images (including elongated images) which are sometimes due to unintended stretching in one dimension
There is also the issue with the composer preview which lets you think that you can manually resize the display image. This has been reported before but apparently hasn’t been considered a priority to fix: