The cost is also surprisingly low, typically coming out less in total than a typical "big hotel" conference does: when you add up conference-room rental, catering for coffee breaks and lunch, cost of hotel rooms, restaurants for dinner, etc., the cruise ship's all-in group pricing typically ends up cheaper per person, sometimes substantially so.
1. It looks bad externally, like academics wasting taxpayer money on a boondoggle. Even if it's cheaper, the image is too luxurious. It looks better to have a conference at a Marriott in Chicago, even if that costs the taxpayers more. It looks bad enough that some people won't come, because their source of funds won't approve the trip.
2. Flipside of the community tightness aspect is that it can feel claustrophobic to be essentially stuck at the conference, literally unable to leave the floating conference hotel.
3. No internet means certain kinds of demos won't work, or need added preparation. Although this is good practice anyway, because conference-room internet is often flaky even on land.
4. Not being able to come for only part of the conference can also be a disadvantage, since the schedule is inflexible. If you have a hard conflict anywhere in the conference, you have to skip it, since there is no way to arrive half a day late, or leave even 2 hours early.
Last year we experimented with having it in a medium-sized town with a compact city center, in a lower-cost-of-living location , to try to get some of the advantages without the disadvantages. I think this worked fairly well, and I personally liked it more than the cruise ship. But there is an added travel disadvantage, because there are few compact towns that also have good international airports.
 Chania, Crete: http://www.fdg2013.org/attendees/
I like the floating village concept, though, and I guess everyone would be pretty relaxed overall, maybe bring the family as well, and what a way to combine vacation with work!
The 2009 version of this conference was on a Disney cruise ship, and the keynotes and plenum sessions were in the auditorium/theatre pictured here: http://www.film-tech.com/ubb/f8/t006888.html