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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?

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.

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