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M3 is there because there are still a decent number of 20x20 stacks using M3 and M2 stack fits in M3 holes without modification or special hardware.

Plenty of M3 options still out there in the 20x20 range:
Omnibus F3 nano uses M3 (my preferred).
DYS Mini
Matek Mini
Piko F4
CL Racing F4 - Mini

If you rotate the motor mount like that motor wires will stick out to the side and boring holes down the length of the arm will compromise it's strength a lot.