In parallel example, we have not managed to find an artificial replacement for egg shells which is required for avian embryos to develop. Some techniques do exist, but none of the them were able to ensure survival past the first 2 weeks. Considering that humans have been breeding chicken for centuries, there is still plenty we don't know about our favourite bird, let alone fellow humans.
There's also the whole "cycle" thing that's apparantley gone on for 6 iterations, allowing humans who reject the matrix to leave and periodically cull them was a solution to widespread rejection of the system that would have affected entire crops of humans. It's hard to do that if they don't have physical bodies to escape the system in the real world.
What really bugged me about their scheme, was the suggestion that a human might make a decent power source. Perhaps that was all misdirection, and the humans are actually the computing substrate of the entire system? Maybe the machines were never able to compute at the power efficiency of a human brain? Maybe they suck at nanotech altogether, and can't even design a decent microchip without human assistance? All their stuff is big and bulky.
(5 minutes later) Lol, I can't believe I guessed it. Thanks to deegles for the background info.