The real reason is such cutscenes cost a fortune to make. The JK1 cutscenes apparently had the budget of a small motion picture. And for the reward you get with them (that is, most players watch them once and that's it) it isn't worth the high cost. If you just have to hire voice actors (or just get the programmers to do it if you're really strapped for cash) it saves a lot of time and money. Emperor: Battle for Dune had live action+CG cutscenes and it came out in 2001 (to reasonable success too I thought), but I haven't really seen a game since then that had them, and the "multi-media game" based on such things has pretty mucy died out (although I believe MYST III: Exile had them, but again that's a 2000/2001 game IIRC).
"Game engine generated cutscenes" (or whatever you want to call using the same models and animations to act out cutscenes in a game) save time, and with the improvement in graphics over the years, they don't look as different from the regular gameplay as they did in the past. In a game like JK1 the in-game models were boxy and lacked detail compared to live actors, but the difference isn't so great in a modern game coming out today (though they still don't look quite real or human).
But anyway, the real reason is monetary. LucasArts has tried to weather the storm of decreasing revenues in the PC games market in various ways, and one of those is in cost-saving measures like not making mini-movies in their cutscenes anymore. The other, unfortunately, is focusing their attention on console games that they can crank out quickly and tie into other products.