Allowing the user to run an executable directly off a USB drive seems like a very bad idea for an air-gapped computer. It's hard to imagine a scenario where this would be necessary.
Copying the "folder" onto the local machine first wouldn't have helped, though. It would still be an executable, and the user would still be enticed to double-click it (because it would still appear to be a folder which the user expected to contain desired files). We could fall back to "allowing the user to use a GUI to select files seems like a very bad idea when they come from the other side of an air gap", but at some point a concession has to be made to usability.
The problems here are to do with how Windows uses and presents file extensions.
The problems here are to do with how Windows uses and presents file extensions.