1. They diminish the value of Google Search as an advertising platform. And Google Search is likely the most valuable virtual estate on the net. I more often click on ads in Google Search than I click on ads on all other sites combined. This is because when I'm on Google Search I'm actually searching for something, so I might click on a relevant ad.
2. They diminish the value of AdWords content network ads. People pay Google to display their ads because they believe they get better return for their money there than on the alternatives (Yahoo and Microsoft). Ads on low quality sites are unlikely to be competitive, so these sites decrease the relative value of AdWords.
That is, high-ranked low quality sites with AdSense are a double threat to the main source of income for Google, and I expect Google to make it their main priority.
Why, then, aren't they more successful? My guess: Because the problem is a lot hard than any armchair designer would believe. Problems tend to be a lot simpler when you are not the one who must solve them.