Afair the argument from Swen is they didn't want to do day/night cycles because if they did they would want to make them meaningful..
The examples they used is that they'd need to add bedroom for all characters, give them a daily schedule and all that jazz.
And frankly THAT would cost a lot, but it would also be absolute overkill that no one is asking them.
The assumption that "You either go ALL THE WAY IN or you shouldn't even bother" is a stupid one. Most of us would gladly accept the compromises necessary (i.e. "daily" NPC that simply disappear at night -and the other way around- and similar shit).
There are plenty of advantages and improvements enabled even by a more conventional and modest implementation of the feature. Like the old BG 1 and 2 already proved in several circumstances and like plenty of other games did after them.
Well, actually even before, since I think it's Ultima that introduced it first.