>>While I am aware of most of the alternatives, I'm more interested in 
understanding the pratical reasons why this method is not used.

There would definitely be a performance problem, especially if the 
sub-queries are big queries.
Although I didn't try it, I think one of these alternative would be to 
leave the sub-query where it is and just store its name in the above 
query, then use QUERY="#aboveQuery.subQueryName#" instead of 
QUERY="#aboveQuery.subQuery#".
The result would be the same, but the sub-query would not have to be 
copied into the main query, and there would be a difference on performance.
Another alternative would be to store the SQL code in the main query and 
perform the sub query only inside the loop.

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