Well, most likely because some heavy-weight extra stuff would be needed to take care of the non-null probability that "arbitrary binary data" might, just by coincidence, contain a byte sequence that starts with 0x3c "<", ends with 0x3e ">" and has just alphanumerics (and perhaps an unfortunately well-placed slash character) in between.

Sure, there are bound to be ways to do this, but I think the vast majority of XML users really don't want to go there (not least of all because of what it might do when passed through various network transfer protocols). (update: e.g. how would you "fix" the ubiquitous "crlf/dos-text-mode" transfer methods to handle "arbitrary binary content in XML"? This is tricky enough already just with UC16.)