The reason they are not widely used is because they are not very versatile guitars. As others have pointed out, they were mainly used to punch through the sound of big bands back in the day, and jazzers have long desired the archtop "sound". Most of the very first acoustics that were adapted with mag pick ups were archtops.
Acoustically, they do not produce the sound most flat pickers or fingerstylists desire. That is the heart of acoustic guitar sales.
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