Yeah, I remember reading about that a while back. I had the 1998 DVD forever and I assumed it was just a rights thing. Looked it up and yeah, it was blurred in theaters because of a Pepsi deal. Now I have the 1981 laserdisc as well and it even has the Coke logo blurred. The “rockin’ rydell” blu-ray replaced it with the design on the blue wallpaper of the burger place. It looks pretty bad now I think, I’d prefer the blurred sign. I’ll bet the new Pepsi ad/logo is much better than the rockin rydell background.
Are you sure you aren’t getting mixed up with the Sing Along version that was released theatrically several years back and which I believe is also available for streaming? That version is the only one I am aware of that had the coke sign digitally removed and replaced with the wall pattern behind it, as well as various other graphics digitally imposed through the film. I have the Rockin’ Rydell DVD and Blu-ray and i’m 99% sure it still has the same blurred out signs that every other transfer had prior to the 4k release.
I can’t comment on the Rockin Rydell release since I don’t own it but I did get the digital version of the Sing A Long version on Amazon last year and I can confirm you are correct about the signs being replaced with wall design.