Probably so that they can make iterations on its design without requiring people to download new software updates - a huge attraction of web apps.

I guess my question then is, why does that hold more true for the App Store than for any of their other native apps?

Their other built-in apps don't involve as much marketing efforts inside them and don't drive post-purchase sales.

I guess there is Newsreader or whatever but I haven't used it and can't comment on it.

Because the iTunes platform is written in Java with a legacy web framework called WebObjects. Also the iTunes business unity has more characteristics in common with Amazon than Apple itself. That's why we're stuck with a thin client for the AS.