It has all the same problems in games as it has on a website, it's just more acceptable to sacrifice usability for 'looking cool' in a game.
"Looking cool" IS a component of UX. UX includes the user's emotional experience of using the product. It is 100% acceptable to do something for UX that is otherwise bad "UI". While you talk about UX here, you really mean UI, because the UX is arguably improved at least for some audiences, who are more positively affected by the dimensionality and light-conscious design the effect brings than negatively affected by the readability downside.
In the bigger picture, people use products to perform a function that often includes how they feel in and about themselves while using it. People buy cars to tell a story about who they are. People buy coffee and sit at a cafe in order to get a moment of peace or some internet access. People wear shoes that are a little less comfortable in order to get compliments on them. This is not bad UX. This is literally the meaning of good UX - paying attention to what people actually want versus the minutia of objective functionality.
In HUD you don’t want to occlude the background since that’s the main area a user is interacting.
Disagree; the action behind the glass will make using the HUD more difficult, and the glass will make seeing what's behind it almost impossible. It makes both parts of the experience worse. Although, on the surface, to an onlooker, it might look 'cool'.