Virtual threads are less general than kernel threads. If you use a virtual thread to call out of the JVM you lose their benefits, because the JVM becomes like the kernel and can't make any assumptions about the stack.
But if you are running code controlled by the JVM, then it becomes possible to do optimizations (mostly stack related) that otherwise can't be done, because the GC and the compiler and the threads runtime are all developed together and work together.
Specifically, what HotSpot can do moving stack frames to and from the heap very fast, which interacts better with the GC. For instance if a virtual thread resumes, iterates in a loop and suspends again, then the stack frames are never copied out of the heap onto the kernel stack at all. Hotspot can incrementally "pages" stack frames out of the heap. Additionally, the storage space used for a suspended virtual thread stack is a lot smaller than a suspended kernel stack because a lot of administrative goop doesn't need to be saved at all.
Virtual Threads are very fast to create and allocate only the memory needed by the actual call stack, which can be much less than for OS Threads.
Also, blocking code is very simple compared to the equivalent async code. So using blocking code makes your code much easier to follow. Check out examples of reactive frameworks for Java and you will quickly understand why.
I'm not familiar with windows, but this certainly isn't the case on Linux. It only costs 2mb-8mb of virtual address space, not actual physical memory. And there's no particular reason to believe the JVM can have a list of threads and their states more efficiently than the kernel can.
All you really save is the syscall to create it and some context switching costs as the JVM doesn't need to deal with saving/restoring registers as there's no preemption.
The downside though is you don't have any preemption, which depending on your usage is a really fucking massive downside.
Nobody is taking OS threads away, so you can choose to use them when they better fit your use case.
Of course there is. The JVM is able to store the current stack for the Thread efficiently in the pre-allocated heap. Switching execution between Virtual Threads is very cheap. Experiments show you can have millions of VTs, but only a few thousand OS Threads.
I don't know why you think preemption is a big downside?! The JVM only suspends a Thread at safe points and those are points where it knows exactly when to resume. I don't believe there's any downsides at all.