I'd assume it was because of 2 reasons, Wood chipping, cause once it chipped the body is no good, Second, you had to be super careful not to buff through the edges. Just my ideas.
I love the recessed neck plate as an owner but as a manufacturer it is a recipe for disaster. The issues involved are a little in the manufacturing and a lot in the field.
When laquer was legal we could finish a guitar with a very thin "build" as environmental regulations escalated the finishes got thicker making it harder to get the exact pocket. The other problem is in buffing....anytime you run up against a sharp corner ;you have a very high risk of buff through. We could live with that What we couldn't live with is the customer or tech that took the instrument apart and overtightening the neck causing finish cracks that would be blamed on us.