I think that 1024 was probably too short as a limit, but I think that it does make sense to impose an arbitrary upper bound to reject malformed requests early.
I don't see what you mean by "the HW vendor's problem", I can assure you that any browser in existence is going to have an issue if you send a 1TB URL, while the NIC will have no issue transmitting it.
What it literally means and what people understand when reading it aren't the same thing. On this case, for people creating sites, "up to" leads immediately into the real meaning of the phrase, while "at least" strongly implies the opposite. But for people creating browsers, the implication is inverted.
They're 2 sides of the same coin, but MS didn't actually rephrase the sentence properly. Their version would have every URL have at least 1024 characters in it. Any less than that, and the browser should reject the URL as invalid.
lol. that would have been awesome. domain squatters would be running for the 1000 character names while crying about all the money they paid for three letters one :)
EDIT: For some limits. For other limits "up to" wording may be more appropriate & is still in use (e.g. storage).