In general, you'll find that tromping about with a sword can get to be a pain, especially if you haven't carried a sword around before. I've taken Iaido, and know how to carry a sword and walk with it properly, but not many other attendees have had this experience. there's a lot more to properly carrying a sword that simply jamming it into your obi. The way you move has to be different and you have to be more aware of the amount of space you are now taking up (the sword essentially expands your width to its length...). If you aren't aware of the extra space you're taking up, you'll be bumping people and banging the sword on objects all the time.
Yes, carrying a sword looks cool, but if you want to sit down, you have to remove it from your obi; when you go into the dealer's area, everyone will be clumped up around the table you want to view and you sword will get bumped many times (this can hurt you if it happens enough times...sometimes it'll get thwacked hard enough that you may be thumped in the face by the hilt!); and when you're walking through the halls, you have to be aware that no one is really paying attention to who's got a sword, so the sword will be bumped constantly.
When I had my Sesshoumaru costume, the first time I wore it I had my sword, but quickly learned that it's so much easier to get through massive crowds when I don't have the sword.
The reason they don't allow live steel is the same reason why they don't allow real guns (or things that look just like real guns). It's just not a good idea to have lots of weapons around in crowds. Another reason is because at least 90% of cosplayers have no clue how to properly use or carry a real weapon safely.
