In most cases I will. Pulling a blob out of a row is a lot faster than opening an additional file handle. There aren't really any downsides to this either unless you are running table scans. SQLite does support indexes (even full-text) and they do work miracles so do use them when necessary.

I would go so far as to argue that SQLite could be used to store all of the assets for any large piece of software (I.e. a AAA game). This would probably wind up faster and more reliable than most alternative solutions out there today.

Can confirm SQlite is used in AAA game engines as well as VFX production pipelines. I know because I put it there.

So - is SQlite a good file system? Should I just use it for everything?

I think hard drive manufacturers should just embed SQLite directly into their devices and optimize the SQLite VFS implementation to be flash aware at the controller-level. Who needs a file system when your disks speak SQL?

SQLite has a page measuring performance of internal blobs vs external files: https://www.sqlite.org/intern-v-extern-blob.html