I agree that it is possible to deal with the security issues, and I really would like the functionality - when Opera had it, I could do lots of really useful stuff, albeit only for Opera users.
Yes, it needs to be restricted to files the user explicitly named. Allowing the app to suggest filenames like autorun.inf or .bashrc, to put files in dodgy places, or look for someone's inbox, are the sort of phishing attacks that concern people who have looked at this. There's also a supercookie-type fingerprinting vector, but I'm not sure that's new and there are easier ways to do the same thing.
In reality I think a lot of this comes down to getting the security right in the UI - which means presenting risky actions to users in ways where they understand the risk. We are better at this than we were a decade ago, but we also understand the risks much better and I think that too makes us more cautious, as an industry.
The fact that native app platforms allow things that frighten the security daylights out of me doesn't seem like a good reason for doing the same thing on the Web. But as I said, the functionality is very valuable, so I hope we can figure out a secure enough way to make it available that browsers do this.