I'm not surprised, having seen what drives automotive assembly. Here's a hypothesis at least:

Trek in those days was still a bunch of bike guys transitioning to mass production. One big issue is to have the right parts at the right time. If one item is missing the line can stop, even if it's a small group of framebuilders. If they ran out of (for example) English BBs and the buyer could get a small run of Italian-thread BBs, why not go for it? It can be a better solution than stopping the line, changing over to a different model, then changing back to 720s when the supply is better.

BTW, my 1984 610 originally had 27 x 1 1/8 wheels. I converted to 700c many years ago. Right now it has Mavic MA-40 rims, 28mm Conti Gatorskins, and 35 mm SKS mudguards. No clearance issues. Has toe overlap, but no tire-related clearance. The fenderline is not bad, either! I get away with the original Shimano 6207 medium reach calipers, with the shoes at their end of travel.

What is toe overlap? Thanks.

For short frames the front wheel might be fairly close to the pedal when the crank is horizontal. If the distance is small enough, the front wheel can hit your toe as you turn the handlebars. This contact won't happen unless you turn the handlebar pretty far, much farther than you would at speed. if the front wheel hangs up on your toe, it can 1. hurt, 2. prevent teh front wheel from turning as much as it needs to.

Based on restricted front wheel motion, you might even fall. Or, if you are very quick, you might rotate the crank back to vertical really quick, and regain balance.

Toe overlap affects and frightens some people, while others are never bothered by it. It's safer not to have it, but lengthening the frame or laying back the front end to eliminate it, are not always the path to a great-handling road bike.

I bought mine new in 1985 a TREK 720
It will run Michelin 35-630 tires (27x 1 3/8) as shown on GMS's 720
except I can no longer find any Michelins in that size
or any road tires in that size.

Currently running Michelins 32-630 which measure 33mm wide.

I slapped a 700c front wheel from my wife's bike
with a 22mm wide rim (700x38C tires {which measure 35mm wide}) and the brakes needed very little adjustment.

I am thinking of having the rear coldset to 135mm and going the 9 speed cassette route with 700C wheels. The original Helicomatic is still running fine.

Alternate plan keep the 720 as is and buy a Surley Long Haul Trucker.
My TREK fits me with a 1mm standover height that may lead me to a more appropriately sized Surly.