Maybe some incompetent people did it that way, but 1-bit transparency was very well possible with native Windows APIs in the 90s (see SetWindowRgn). Later on (starting with Windows 2000 IIRC) it was also possible to have semi-transparent (alpha-blended) regions.
In a thread about “if it’s not stupid if it works” you accuse people of doing something “incompetent” by doing something ostensibly “stupid but works” but totally miss on what was even possible “non-stupidly.” There feels like some form of irony here.
Not exactly. With 2000/XP you can set the entire window opacity. Still no gdi+ native. So regions were still just shapes(1bit mask). Trying to set a pre-multiplied bitmap to a window will just give you a brightened version(the multiplied version).
Though there was some support for cursor shadow at this point, and the improved GDI heap really helped, making faking a window drop shadow actually pretty feasible. Vista and Aero is the first native support for Windows with alpha channels.
I actually liked Vista. It worked just fine and wasn't unnecessarily reorganized. Plus the improvements to the OS threading model were excellent, which is why 7 is so incredibly rock solid, probably peak Windows.
Please educate yourself before you accuse people of incompetency. Of course it was about (pseudo) alpha blending because "smooth shadows" around everything became very popular in the late 90s.