There's much more to it than that. As noted, you can still apply the registry settings that allow free arrangement of icons within folders, but, as of Windows 10 1703, the positions are not saved. The code that provided that functionality may have been completely ripped out or may be disabled. If it were disabled in such a way that it could be enabled, I'm sure we would have seen a third-party tweak for that by now. It's unlikely that anyone can build an app to add back that capability to File Explorer because developers don't have access to Explorer's source code and Explorer's add-in support is pretty much just the option to add file handlers that can be launched via a right-click. Icon arrangement in Explorer (i.e. not in a completely separate file manager), similar to what's still supported for the Desktop, would have to be provided by Microsoft.
AFAIK, Microsoft never explained why they removed the feature. Their change history blogs are very marketing-driven, so they tend to not mention features that have been removed. For example, this feature was first turned off (but not completely removed) back when Windows 7 came out, but I found no mention of the change in the blogs. It's logical that there was some reason in regards to performance, reliability, or support for newer hardware (e.g. higher dpi monitors), that drove the decision. If I ever come across an official explanation, I'll be sure to post it here.
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