You asked a question that I consider one of the hardest for this sub to answer, for two reasons 1) it is relatively recent; and 2) it's not exactly something you can read in a book, but rather something that you have to read in many books, articles, journals, etc. and then formulate your own personal thoughts on.

To attempt to answer it, I'll repharse your question as an answer:

Tito actually managed to suppress ethnic rivalry and began to replace it with "Yugoslav nationalism", or is the underlying presence was exagerated, used, and brainwashed into the local populace in the 1980s and only recognised romanticized internationally post-1990 in the Yugoslav Wars.

To explain. Ethnic rivalry (I don't know if I would use that term, but I cannot think of a better one) existed prior to Tito, and culminated in WWII. I won't go into details with what happened there, because that's a bloody mess (but then, everything post 1804 Balkans is). What did not exist (and this is what I meant by romanticized) is a "centuries long ethnic hatred) in the Balkans. I found this term almost exclusivey in Western articles. The only centuries long ethnic conflict/hatred in the Balkans was <insert small state here> and the Turks, with a possible exception made for Greeks/Serbs v. Bulgars. Serbs, Croats, Slovenes, Albanians, Bosnians never fought one another until WWII (I am excluding feudal 'kingdoms' fighting one another) with some exceptions made for WWI when you were found on the wrong side of the trench, fighting for a flag that was not your own.

Tito did suppress ethnic nationalism, but not so much by outright suppression, moreso by structuring the Yugoslav state in such a way as that no one ethnicity would dominate federal politics. The creation of the Muslim, Montenegrin, and Macedonian nationalities effectively diminished the near majority that Serbs held. Allowing Kosovo and Vojvodina to function as autonomous provinces further diminshed this. In essence, the Yugoslav state at the federal level was fundamentally as deadlocked as the UNSC is today.

Tito also eliminated (violently) all those who opposed his government. Goli Otok is an island notorious for political prisoners. Supporters of the royal family (Chetniks) were forced out of the country, or plainly killed. Likewise for sympathizers of the Ustashe. Informants were widely used, a word against Tito, or against Communism/Yugoslavia, would commonly end with that person dissapearing (up until the 1960s-70s). So in that sense, suppression did happen.

In schools, children had to sing Hey, Slavs as the anthem, and they gave a Pioneer's Pledge not unlike the Pledge of Allegiance, where they expressed solidarity in Tito and Brotherhood and Unity. These ideals, over time, took hold. Yes, there were setbacks (Croatian Sprin the most notable one), but generally speaking the identity of Yugoslavs vs. Serbs/Montenegrins/Bosnians/Croats/etc... was growing (a rise from 1% to 5% between the 1971 and 1981 census).

Still, by the time of his death, it had not grown enough. Without a strong figurehead, a crumbling economy, and many, many, many other reasons, people began to go to ethnic nationalism (I intentionally did not use the word revert). Local politicians exploited this, brainwashed the local populace, academics joined in (SANU Memorandum is very infamous for this), and by 1992, it was hell.

This is really an ELI5 answer, because honestly, the question is so complex, you have to break down what sort of 'rivarly' existed, what policies Tito undertook, what actually happened in the 80s and early 90s, why people were so easily manipulated. This then raises the question of why people were so willing to be up in arms against what were 2 years ago their brothers and sisters. This then leads to more sociological questions as to why these people are so easy to bring to arms, so many times throughout history.

I would have tried to answer all that for you (and I consider myself very well educated in this subject) and if you (or anyone else) wish for a more detailed response, I will be happy to supply one, just try and make it a more focused question, because with this, I'll end up jumping from one topic to another in each sentence..

Worth noting, prior to WWII (in 1929) you could not declare yourself a Croatian/Serbian/Bosnian/Montenegrin/Slovene, but only as a Yugoslav. That's more a fun FYI though.

EDIT: Also worth noting, a 1989 NYT article discussed growing tensions, so it wasn't recognized only with the Yugoslav wars, also, declassified CIA documents from the 80s show predicitions of this happening in Yugoslavia, so it wasn't out of the clear blue sky either.

For serbs and communists. But for Croats it was terrible. About 500,000 Croats were killed.