Variety of reasons, not all fitting everyone. For my preference I like the minimalist MPC-BE interface at full screen on a separate monitor; others might prefer GridPlayer or something else. I feel like external player gives everyone the customization they prefer.
Embedded player would require making a tremendous number of design options: where does it reside in the interface, what does it cover up when open? and if it can pop out as a separate window, what value does it bring over an external player?