For on thing, it contradicts the theory of "do the simplest thing that possibly works." Google Wave is great for collaboration and group work and game playing. However, when it comes to replacing email it is too bloated I think. Of course they will probably speed it up and simplify as it develops.
Also there will always be a market for a simple email client, if only for the simple reason that not everyone wants the entire world to see that they can't type very well.
It is more professional to send a completed email then to have the recipient see you typing in realtime complete with misspellings, clumsy typing, and grammar errors.
That is the main impression that I have with Google Wave. Everyone watching a wave can see me type so I have to be more careful rather than just typing then looking it over before hitting "Reply".