''making it near impossible to learn how to use the widget properly''
Only if you want to use all the available options. Tell me one person who does that.
''It also means thousands of configuration combinations that need to work together''
Not all of them are not related.
''This is super straight forward to implement''
Took me two days to find this, and I had to dig inside jQuery UI dialog code to find what I was looking for, after I had tried every other suggested option. Others stopped at the first dirty hack that worked for them.
''If 80% of users don't need it''
To me it sounds like you're making the bare minimum expected from something like this and leaving everything else to the user, which, to me, is unacceptable for such a popular plugin. But who am I to speak of such things...
''it's extremely easy for anyone to create a plugin which adds the option''
If so, could you please make that plugin for me? I don't want to modify jQuery UI every time I update it, and my current solution (the one from the fiddle posted on the stackoverflow question) is IMHO a dirty hack, because the _createOverlay() function should be private and not overridable from outside.