* I end up deleting most of the prose once the code starts getting good. Good code is sort of literate already.
* As others have said, when you're doing some code churn, it's difficult to maintain a narrative structure that makes sense.
* Existing frameworks, at least for web programming, encourage you do draw boundaries around individual homogenous chunks of one type of code (router, view, migration) rather than human conceptual concerns (upload a file, browse my photos, etc). In order to do a good job explaining what a view does, you need to know what the controller is providing. In order to understand that you need to understand what the domain layer is doing. Frameworks just make it really hard to put, in one file, everything necessary to explain a concern.
I still believe in the idea, but I think for literate programming to work well it has to be done in an ecosystem where the APIs are all structured for literate programming, which doesn't really exist (yet).