Imagine that the real underlying URL is somewhat secret (not 100% secret but should not be readily disclosed) or one that can change each time it is invoked so would not work well if it was saved as a favourite or put in a playlist.

So myplugin://name results in the generation of the correct underlying URL (e.g. h t t p : //service/stream?key=abc) for LMS to use each time it is invoked - and the various regular UIs only ever show myplugin://name

We have examples here where people are posting stream URLs that contain personal details. That can help in diagnosing things but should not really be done.
Some that notice it go back and edit the URL to xxxx out the private parts.
My reason to want to be able to do this (and it is now working in my test code) is not quite the same but I could see it being useful.