I don't agree with the downsides - what you are describing is simply a bad implementation of this mechanism. At the very least, the files could only be checked every 5 seconds, or inotify or similar mechanism could be used.

The main upside is that it is possible for sysadmin to allow 3rd party users to change parts of http server config via ftp (!). And last I checked, php was dominating web landscape - I would argue that the convenience of deploying plays a large part in this.

Plugins... If it is not part of original app, can I trust it will stay available? I might as well use Apache instead.