Because it's easy to trigger accidentally (the false positive rate for triggering hover behavior is usually incredibly high), because it requires excess precision to navigate correctly (nested hover menus can easily become a mini-game of "don't fall off the edge or you'll have to start all over"), because onMouseOut is flaky and can result in dangling hover menus that obscure content, because it's often more difficult to make cross-browser compatible, because it's more difficult to gracefully degrade a hover menu system when scripting is turned off, etc.

There are places where :hover triggered behavior is beneficial, but these tend to be vastly overwhelmed by the examples where :hover behavior is abused to the point of degrading usability. I'm aware that designers tend to loooove hover menus because they are shiny and cool, but from a usability standpoint we'd be better with a lot fewer of them.

The problems you mention are certainly real, but are they problems with hover effects in general or with specific uses of hover effects that may not be appropriate?

For example, while I completely agree that nested hover menus implemented naively (as many sites do) can be very annoying, single-tier menus with large areas can be an effective way to provide navigation of larger sites without cluttering the main page with dozens of links that most users won't care about. Likewise, while the "falling off the edge" problem is a real one, there are tools like jQuery's hoverIntent plug-in that can make the UI feel much more natural.

While I don't agree that it denotes bad UX in all cases, I acknowledge that it can be overdone to the point of annoyance (ala the new YouTube, which is a hover-fest)

I have to say I quite like YouTubes latest incarnation with all the hover elements because I have no interest in using anything other than the play button (I only use it for listening to live versions of music) and so a cleaner "first impression" UI suits my persona very well. I understand that it can be a horrible experience for a persona which is specified to be 'low-tech knoweldge high-functionality use' though.