There are three closely related reasons why spaced repetition is much less useful in practice then in theory.
1. It doesn't train real task performance. There is a spectrum of problems that people solve. On one end it is the recall of randomized facts in a flashcard prompt->answer way. On the other end is task performance, which can be more formally thought of as finding a path through a state space to reach some goal. The prompt->answer end is what SR systems relentlessly drill you at.
2. SR is pretty costly, prompt->answer problems are also low value. If you think about real world scenarios, its unlikely that you will come across a specific prompt->answer question. And if you do, the cost of looking it up is usually low.
3. The structure of knowledge stored is very different (and worse). If you think about high performance on a real world task like programming or theorem proving, you don't recall lists of facts to solve it. There's a lot about state space exploration, utilising principles of the game, leveraging known theorems, and so on.
This is a more descriptive version of the "rote memorization" argument. There's two common counters to this:
1. Learning is memorization. This is strictly true, but the prompt->answer way of learning is a specific kind of memorization. There's a correlation-causation fallacy here - high performers trained in other ways can answer prompts really well, it doesn't mean answering prompts really well means you will becoming high performing.
2. Memorization is a part of high performance, and SR is the optimal way to learn it. This is generally true, but in many cases the memorization part is often very small.
These ideas more accurately predict how SR is only significantly better in specific cases where the value of prompt-answer recall is really high. This is a function of both the cost to failing to remember and the structure of knowledge. So medical exams, where you can't look things up and is tested a lot as prompt->recalls, SR finds a lot of use.
My own guess for the what the next generation of learning systems that will be an order of magnitude more powerful will look like this:
1. Domain specific. You won't have a general system you chuck everything in. Instead you will have systems which are built differently to each task, but on the similar principles (which are explained below).
2. Computation instead of recall - the fundamental unit of "work" will shift from recalling the answer to a prompt to making a move in some state space. This can be taking a step in a proof, making a move in chess, writing a function, etc.
3. Optimise for first principles understanding of the state space. A state space is a massive, often exponential tree. Human minds cannot realistically solve anything in it, if not for our ability to find principles and generalise them to huge swaths of the state space. This is closely related to meta-cognition, you want to be thinking about solving as much has solving specific instances of a task.
4. Engineered for state space exploration - a huge and underdeveloped ability of machines is to help humans track the massive state space explorations, and evaluate and feedback to the user. The most common used form of this is currently git + testing suites. A future learning system could have a git like system to keep track of multiple branches that are possible solutions, and the UX features to evaluate various results of each branch.