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One of the reason could be that the old academics, having grown up with dusty books, thinks that this is the only way of proper learning. However, the Internet is ushering its way through this kind of mentality, and is having a very good response from the new generation of it-bred academics. Renowned Universities, such as University College London, have added, in their Learning and Teaching Strategy statements, plans for a new way of studying a Masters Degree, which will involve, together with ordinary research, even the Internet as a source and a mean of completion the MA. This, from my point of view, is an excellent idea, for the internet, if used properly, is one of the most complete database for researching information in almost any disciplines. Yet we have to be careful, we ought not to think that we can resolve al our problems with the Internet, which should be used as a complementary source and not as the only one!
Using the net for distance learning at any level makes sense to me. You can do a number of Master's degrees that way, I believe. ;-)