Re: GVFS sounds super dumb
The achilles heel for Git is that you must pull ALL the repository in order to use any of the respository. Various ways exist to work around this issue - shallow clones, submodules, subtrees, repo etc. but nothing is very good.
I suppose the idea for GVFS is that when you do a clone of Windows, you don't transfer 300GB of crap to your machine before you even start. Instead you "clone" and the filesystem looks like the files were fetched but the fs only fetches a file's contents on first read. So if you're working on one DLL with 100 files you don't need to download the gazillion other files in the codebase.
Clearcase (contender for the worst source control system ever invented) did this too with a thing called a dynamic view. The difference in Clearcase's case was the dynamic view could change while you were using it if someone else committed files to the same view. Enjoy trying to debug problems when header and sources keep changing underneath you.
At least GVFS would behave like Git in that what you see isn't going to change unless you pull / fetch / merge. I'd like to see how MS intend to open this up outside of themselves though.