I think (I know, thinking is dangerous - wears out the brain) that the first pushbutton magazine catch was on the Borchardt, so it was natural to carry it over to the Luger. I believe also that the Borchardt (1893) was the first pistol to have a detachable magazine, and to have the magazine in the grip.
Drop free really wouldn't work too well with a heel type of mag catch anyway, since the hand would be in the way of the magazine.
The normal way of removal is as Jim Watson says, activate the catch with the thumb and pull the magazine out with the fingers. The problem, from a fast reload point of view, is that with drop-free magazines, the off hand can be reaching for another magazine while the first drops free.
FWIW, the Borchardt/Luger magazine catch may not have been the only idea Browning got from that source. Up to about 1904, all Browning's cartridge designs were semi-rimmed, the result of reducing the rims of revolver cartridges to a minimum in order to work through a magazine. But around that time, Luger came to the U.S. with his 9mm pistol and a cartridge that was rimless and was supported on the case mouth. Browning's next cartridges, the .45 ACP and the .380 ACP, were rimless. But he did Luger one better and made those cartridges straight cased, better for feeding than the tapered Luger cartridge.