The problem is that they were fine the way they worked before because it wasn't OP to give them all the features that they had. The armor and weapon proficiency was balanced out by the +2 to Strength, as the people who wanted the armor proficiency probably didn't want the strength bonus, and the people who wanted the amazing bonus to Strength didn't want the armor and weapon proficiency, because they already had that. And that was fine, that was balanced in most circumstances, with most features only being useful to certain people and not to others.
That would not be an issue if both of the following things were true:
- All races were balanced like that.
- No feature that allowed you to switch these previously useless proficiencies or ability score bonuses existed.
Number 1 was never the case, there were very few races balanced the same way, decreasingly as many as the years went on. Those few races that were partially balanced this way were not as skewed to this way of balancing as the Mountain Dwarf was. As you stated, this wasn't really an issue before, the features mostly balanced each other out. However, Number 2 caused this discrepancy to become an issue.
Now, any race can switch any of their proficiencies for any other proficiency that WotC says is "equivalent." While this is not an issue for the races that are not balanced in the "ignore half this race's features to get the thing you want"-way that the Mountain Dwarf was balanced around, but it is for the Mountain Dwarf and other races. Basically, it would not be an issue to switch around your proficiencies if the proficiencies were all intended to count for all characters of the same race.
The issue is not the new rule as much as it is the disparity between how a Halfling or Shifter is balanced between how a Mountain Dwarf is balanced. The discrepancy is the issue, not the new ruleset.