One case where they don't work well is when you have multiple users on one domain. Like an old school server with the users at /~user1 and /~user2, etc. user2 might write a cgi program and want to create an entry in robots.txt but he doesn't have access to the global robots.txt, just the stuff in his home directory. Ditto for the favicon.

Nowadays domain names are cheap and I don't see as many sites like that any more...