In theory, an extension could register an alternative custom bean to override the built-in Instance/Provider bean for injection points such as @Inject Provider<String>.

It is not forbidden at the moment. The spec only states that there must be a built-in bean eligible for any injection point with Instance/Provider required type and any qualifier. See also https://docs.jboss.org/cdi/spec/2.0/cdi-spec.html#builtin_instance.

It seems to be a powerful feature. On the other hand, it might be a source of confusion. Take for example this injection point:

@Inject
@MyQualifier
Instance<String> instance;

The qualifier is now considered when calling instance.get() and NOT when resolving the injection point.

Note that the spec already allows to decorate built-in beans.