I don't think that JVM will do magic and execute something different from actual sources, even for String. On the other hand, optimizing those bytecodes to compile to perfect machine code or playing with code to produce bytecode which will be correctly optimized by JIT is more reasonable approach, not only java.lang.String would benefit from those optimizations, but any other developer with similar code.

Method call overhead is real and calling equals method is slower compared to reference comparison, but eventually JIT might decide to inline this method call, so there'll be no overhead after that. Anyway it's unlikely, that those difference will be noticeable in real code, IMO.