It does not have enough RAM to buffer frames continuously at uncompressed DNG format rates for continuous video recording to SD card, whereas other cameras that were designed specifically for video recording have enough memory to be capable of doing this.
The buffer is important, but it's more about being able to stream a metric shitload of data to a unwholesomely speedy memory card - once you can do the latter, the buffer helps smooth over hiccups but won't let you record indefinitely. The 50D's CompactFlash interface probably shares a design with a higher-end camera, Canon not wanting to waste effort in building a second, deliberately crippled version.
Thus my interpretation is that this camera model's hardware specs were deemed insufficient by the manufacturer for this specific capability, and considering that it can only do burst mode up to $X$ frames before capping out its memory buffer, the manufacturer may have been correct.
Being able to record RAW video is a pretty new feature on any vaguely consumer-oriented camera - it's more sheer luck that Canon's dSLRs have features which make it possible, albeit in a hacky manner. I get the impression that on the 50D, it's grabbing data from the sensor in a manner intended for the rear display or for feeding into the (non-existent) H.264 encoder, and then streaming it out to a big file on the memory card before the memory runs out.
When you've captured the data, it's in a big, opaque file that needs post-processing on a PC to do anything with it - in this case, it gets split into sane DNG files for further processing in software like Lightroom or similar. You can record the video on the camera, but you can't (unless I'm horribly mistaken) play the video on the camera - you need to do plenty of subsequent processing to get it into video form.
Don't get me wrong, it's an incredibly cool hack - partly because it gives access to a feature which few high-end cameras have even today. It's not the manufacturer deliberately locking users out of an easily-implemented feature, it's the manufacturer not even realising that such a feature was possible - albeit in a restricted, but still usable, form.