I don't mean to paint all Warlock players (or for that matter, Power Gamers) with one brush, but in my experience, the only people who fight for the most-generous ruling here (that you have Hex going all the time with all your slots and anything less is nerfing the Warlock)... like to play Warlocks (or worse, Warlock dips) because the result is overpowered?
I typically DM. I'm on the "pro Hex" side because it makes sense to me, within my understanding of RAW and RAI. I don't see anything supporting the idea that a spell slot is "occupied" and feel that doing so would be against the spirit of a short-rest balanced class.
Really, I think
hex would be generally balanced as a class ability instead of a spell. The main reason why it's a spell is most likely to eat up concentration (which, IMO, would be bad to start using for non-spell things). The 1/8/24 hour duration also turns the spell into an ability that changes its recharge from short rest to long rest to always on. Yes, the spell slot is a cost, but it's a wonky one because it rapidly turns into a cost only if you completely fail to defeat your target and just seems weird.
If someone wanted to carry a bag-o-rats, I'd probably let them but they'd always have a slightly creepy/crazy vibe. If they wanted to do that
and take a short rest before actually adventuring, well, it doesn't really break game balance, but it definitely qualifies as "gaming the system" which usually earns my ire. I'd rather not play than play with a punk rules lawyer who is more interested in playing the letter of the law than the spirit -- I'd probably just tell them that it's all part of the long rest until they actually break camp and head to the "dungeon".
As a player, I don't think I could bring myself to abuse the short rest mechanic and wouldn't be inclined to do the bag-o-rats, but I could see creating a character who did do the rat sacrifice to play up the creepy/kooky factor in a humorous way. If someone else was doing it in an entitled fashion, I'd most likely call them out and tell them to play in the spirit of an RPG. If the group, as a whole, supported that kind of behavior, I'd absolutely walk.
At a table where
hex still took up a slot during a short rest, I'd either not take it or not play a Warlock. I think it does unnecessarily depower/nerf the spell. But, that bothers me far less than the bag-o-rats plus short rest before adventuring trick.
There are really a couple of different conversations, here. One is what my ruling would be and why. The other is how I view the more extreme ends of the argument. Even though I agree more with the pro-rat faction's interpretation of the rules (seriously, I typed that?), they have stepped into poor form and entitled rules lawyer territory much more often than the anti-rat faction over the course of this conversation.