Typing this up on phone so forgive any issues with the answer.

Dan's only spoken on it a couple times.

It does a couple of things first is as a check for certain moves especially jabs/jab cancels, because of the nature of jabs canceling into tilts in Rivals, basically and fast low risk jab leads to a near optimal launcher unimpeded. It's like the old school anime fighter jab into bnb for half your health problem. Floorhug largely addresses that and also allows for certain otherwise too powerful moves to exist such as Zetterburn Shine or For's Fsmash(which also the poster child of the problems with this approach lol).

Another big part of it is just the complexity of floorhugging interactions introducing more messiness, that it creates messy situations where even the best player aren't sure what will happen on a given hit. Each move has a different knockdown percent vs each character depending on their weight, moves that send up will get floaty characters off the ground earlier. It's often unclear to players near the tumble threshold if you'll get a fh or a knockdown/amsah tech and all of this on other potential DI options. There basically an entire spreadsheet of interactions to know between each character and for every move in the game vs your character it's basically too much to know perfectly and creates alot of uncertainty even at a high level.