If you're working on a distributed system, most of the traffic is not going to be your SSH session though.

sure, but we do so with much better networks than in the 80s. The extra overhead is not going to matter when even a bad network nowadays is measured in megabits per second per user. The 80s had no such luxury.

First world thinking.

Not really. Buildout in less-developed areas tends to be done with newer equipment. (E.g., some areas in Africa never got a POTS network, but went straight to wireless.)

Yes, but isn't the effect on the network a different one now? With encryption and authentication, your single character input becomes amplified significantly long before it reaches the TCP stack. Extra overhead from the TCP header is still there, but far less significant in percentage terms, so it's best to address the problem at the application layer.

the difference is that with kb/s speed, 40x of 10 characters per second overhead mattered. now, humans aren't nearly fast enough to contest a network.