Gmail already is free storage, AFAIK it shares you data quota with you Google drive account.

Most likely this is a 'mail-loop' prevention. If you setup two accounts that forward to each other, then emails will be stuck in an infinite loop. Inject a couple of multi-megabyte emails into that loop and you can take down the entire service. This is effectively a DOS attack.

I don’t think so as email forwarding is pretty basic and it’s blocked even for tiny messages.

I suspect it was just some stupid developer pre-optimizing, thinking they were clever and not thinking through use cases. “Every email from me to me will skip external routing and just get flagged in storage; therefore, any email from and to me and not through that process must be fraud and we’ll just save the user from that and black hole it.”