The main reason people don't use C++ is that they don't really find a need to do it.
In my opinion, there are things that C++ (and OOP) lends itself nicely to, and there are plenty of things that it doesn't. For instance, writing GUI programs on a normal OS is something that lends itself quite nicely to OOP. I have written both C and C++ GUI programs before, and I have to say that the former is generally painful and not a fun experience.
Emulators are an area where OOP is generally silly and just gets in the way. Operating Systems are another area that is like that.
Games, its a tossup. If OOP is baked into the design of the game it can be quite a nice thing to have. But at the same time, its not a necessity by any means. Some people don't find it helpful, some do.
With the patches that KOS has for GCC and Newlib and such, KOS fully supports C++ as well as Objective C (and Objective C++). If people want to design a C++ library to wrap around KOS, they certainly could do so. Heck, I did just that
back when I was still working on writing a game actively. That said, in the past, there were plenty of issues with using C++ with KOS. Some things didn't work reliably, if at all (such as exceptions, and for a long time the STL in any program that used threads). The fact that you don't see much Dreamcast stuff using C++ probably reflects that state, as that's when most of the active development was still going on.
In the end, it all boils down to personal preference. Some people like the OOP approach, some do not. Its certainly not something I would ever force on people using KOS. Also, keep in mind that all of this stuff does introduce overhead. Virtual functions, especially. Extra overhead is probably not something you want a lot of in a Dreamcast program.