The binary/text distinction is not illusory; it is a cognitive issue. Limiting file contents to printable characters (not just byte values since you can use multi-byte characters) makes people be able to edit them. Text files do not usually contain just random characters; they contain readable words that can be understood and documented rather easily.
The machine doesn't care, true, but to people there is a big difference between a sequence of random byte values and a sequence of written words. Just as, to me personally, there is a big difference between a text in Spanish and a set of cyrillic Russian words.
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