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Anyone knows the reason why the Bluesky login is so unnecessarily complicated compared to something like mu - why do I need to pick my PDS provider manually while other clients can just get this info from my handle and send me there automatically?

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The Bluesky web client chooses your PDS automatically for a while, when you hand it a valid handle during login. Otherwise, login with atproto is a bit involved, as there is no central auth server. Individual PDS act as the OAuth authority for login. Unavoidable with a decentralized topology.

Other decentralized systems are even more complicated (Matrix), or just ditch that part and declare a fixed instance as always authoritative (Mastodon).