Cost of bandwidth and storage. Security of these images. Nobody here likely knows.
spinnerlys,
Software Update does not offer OS upgrades.
Ah, I seem to have misunderstood the original question, as OS X upgrades are the point releases for me, as I always do a clean install with a new OS (since Panther anyway), thus I thought the OP meant 10.6.3 to 10.6.4 as Mac OS X updates.
Maybe Apple does want to make it easy for the customer, and making a DL-DVD out of a huge Mac OS X 10.7 download is more work than the average user and consumer is able to do in Apple's eyes.
Thanks for the reply. I was talking about major releases like tiger, leopard etc. I was just thinking about why I had to wait to get a physical disc not just a download. I just think it is a waste of time, packaging etc.