Bad UI -- Suggestions on how to improve:

I don't mind the squish. I like it! I've always had an issue with not having enough space to include all the messages I wanted to in a screenshot. BUT the lack of lines separating the messages per person is just jarring and feels claustrophobic. And, I didn't think I'd care much about the line that used to be above the chat bar being gone, but now it just feels like the chat sits too low. (I don't doubt I can get used to that part, but my dyslexia needs the boundary lines between messages. I don't like feeling like I have to squint to see who's saying what.)

And then there's the quick-reaction bar. It's too big. It's too abrasive! It's a sudden pop of icons and color where it doesn't need to be. It makes me feel like I'm going to accidentally click on a reaction, and trying to let my mouse hover with that bar just popping up is too uncomfortable on the eyes. Too big compared to the squished UI.
I think a nice solution to this would be to make the quick-reacts smaller and along the same plane as the text itself. Like how the emoji menu button used to look.
I also wouldn't mind seeing a quick-emoji option on the chat bar, for when I want to type multiple of the same emoji quickly. JUST DON'T MAKE IT HOVER!

Last thing, I don't actually mind the dark highlight when hovering individual messages, and I like that I can see timestamps for them too. If anything, it could be a gray just a little bit closer in shade to the background gray. I've seen some folks upset by how stark the difference is.