One thing I thought of is that proxy_buffering is ideal if you have slow clients - where downloading the media files could take a long time. In this case, the goal would be to free up upstream workers. However, since my upstream is NOT an application server, and just nginx, is that really necessary?

Only thing I can think of there is that it could be bad to keep all those "slow" connections open when reading the response from disk. If there are 100 clients connection for different media files, and they are all downloading very slow, maybe it would be a negative performance impact on the storage servers to be reading all that at once. But with proxy_buffering turned on, I assume that the entire response is read from disk RIGHT AWAY, and then stored in the buffer on the proxy. But if the proxy is just writing that response back to disk, doesn't really matter much does it