CGI did namespace these headers correctly: headers X becomes HTTP_X. The problem is that the outgoing proxy config variables aren't PROXY_X, they're X_PROXY. (Other env variables from CGI aren't namespaced, however)

Dumping the headers into a single env variable means a) you need to have support for pretty big environment variables which probably wasn't realistic in 1993; b) every program that wants to use headers needs to know how to parse them, which is tricky.

Dumping the body into an env variable is bad because any reasonably sized body is not going to fit, and you really want the program to be able to start working on it before it completes.