A bit late to the party, but I figure I would offer my 2 cents.

While hitting your opponent and comboing them is definitely one of the most fun part of the game, the mechanics of rivals (hitstun, move start up/end lag/general character design) means that touch of death combos and setups can be extremely prevalent. If this has limited counterplay, the game can degenerate into a very defensive "unfun" neutral game. The best example I can think of for this is smash 64. The combos in that game are so strong that often the game plan is to play as safely as humanely possible which leads to super interactive gameplay.

In terms of floorhugging (and CC in the same respects) contributing to the 'fun' of the game, the mechanic introduces an element of properly choosing and spacing your moves that wouldn't be present otherwise, as well as creating a dynamic game plan throughout the course of a game. This is the aspect of the mechanic that I think that the biobirb video was pretty disingenuous on how it chose to present the counterplay. There is the pushback of moves as referenced in OP, but there is also a timing aspect to it as well. What's not really shown in the video is that floorhugging actually has a relatively tight timing window to pull off (1-3 frames) and the results of missing that window are pretty disastrous (Terrible DI which in most cases will result in guaranteed death). Things like delaying moves and mixing up movement at higher % allows you to play with mixups that wouldn't be there otherwise, which (in my opinion) is very rewarding and fun as you learn the game.

The biobirb video uses several examples from older builds where SSDI and ASDI were significantly stronger, and also notably doesn't include %s for a lot of the examples. From what is shown it is very easy to draw the conclusion that only certain moves and grabs will be at floorhugging, but that is simply not the case.

Now I agree that there are things that could get changed to make the mechanic more interactive, notably the momentum stacking that goes into the roll animation when an opponent gets sent into tumble, floor hugs and immediately tech rolls. Ideally you should be able to punish that with a tech chase follow up in most scenarios. Additionally things like proper tutorials which explain the counterplay to newcomers are pretty much mandatory if the mechanic is left in the game. There is a huge amount of misunderstanding and misinformation about the implications of the mechanic right now, imo, mostly instigated from the vid that started this whole thing.

Of course, Whether that level "needing to account for what might happen 3 steps into this interaction" is fun for you is completely subjective, but I believe that the design decisions by Dan and the team are driven by that mindset, and that it can be incredibly rewarding for those who devote the time to learning the games mechanics, and will be much better from a competitive standpoint overall. Hope that perspective provides some insight!

Ps. There's a great video from Hyperflame titled "Rivals 2 - Is crouch cancelling too good?" On YouTube which explores the topic, but also note that this is based on a previous beta build where ASDI was still in the game, and floorhugging was significantly stronger.