L1C is not deprecated. It will be supported for the foreseeable future, until it becomes clear that L2A can replace L1C in all means. It is however not expected this to happen shortly (see below).
ESA is supposed to start processing L2A globally today (see https://cophub.copernicus.eu/news/News00252). As soon as this happens, the data should become available through Sentinel Hub as well. We do however expect that there will be no L2A processing for the archive data for at least next 6-12 months.
We will check the issue you have reported, it is almost certainly a bug.
After further inquiry we are no longer certain there is a bug
When creating a new layer, default data source is still Sentinel S2-L1C, as it was. When creating a new layer (or changing a data source), you need to configure “Data processing” method, which you do by clicking the blue pencil right of the warning message.