The idea to drop letters was one of the things they had in mind for the original longhorn but it got scrapped. Libraries sorta fix this but in the end we still have them and unless there's some deep file system changes we're stuck with them.
Wouldn't that cause similar problems to if we scrapped IP addresses and just used domain names for sites ?
Windows needs something to look for, drive letters seem a fairly good way of doing that vs naming drives, if someone inserts a flash drive called "Drive" and C: is also called Drive... what then? Windows would have to rename it as it does with drive letters