I'm confused by the CP/M reference. Author says it'll be important later then proceeds to explain how it had nothing to do with CP/M or the 8080 CPU.
If CP/M had used environment variables for configuration, presumably there would have been an established standard for TMP vs. TEMP that DOS would have adopted. The real catch, however, is that CP/M didn’t have directories. Nor did DOS 1.0.
Agree, CP/M has nothing to do with the story, nor does the 8080/8086 sidetrack.
The whole story is that Microsoft just never bothered to standardize, despite using it themselves.