I think normies (not hn reading outliers) in Gen Z and alpha may have regressed. Younger people come up in the era of devices and apps hiding the existence of a filesystem from you.
I’d say the gap is going back to being a large canyon. Just like in the before times, nerds are hyper aware and then everything else is abstracted away for the common person. Anecdotal evidence but my take.
I don't think there is any regression. I think if anything, really overestimating how much people understood. Being a millennial and knowing a lot of other millennials and gen-xers, They can drag and drop, but they really don't understand much more than a folder is something files can go in. Files, you can tell them its fairy dust in a box and they'd believe it. Its just magic. I also work on a point of sale system with many users and clients who are gen-x and millenials, and seeing what customer support tackles, I don't think most normies ever really understood.