Why TimeMachine defaults to case sensitive?
Case-sensitive and -insensitive filesystems under OS X are a mess (to say the least), primarily because some well-known and big software companies require their software to be installed on an case-insensitive filesystem. Otherwise these applications wouldn't really work because accessing IMPORTANT-RESOURCE.jpg would never work with a file named important-resource.jpg on disk.

OTOH for TM backups this is not really important because you will never run an application directly from your TimeMachine drive. Using a case-sensitive filesystem in that case covers both possible options without negative impact.