I used WOS as it is the best case that 90% of the other people out here understand. The basic meaning is you're tying *every* application to a single library, and pray that no virus or trojan comes along and borks that up. I have had WOS apps that fail to load because the WOS library got corrupted. This kind of functionality should be handled by the kernel invisibly, which is actually easy to do. (surprisingly, the mechanism for this was explained in the very document linked to)
While, yes, it will work, it remains to be an external, and thereby vulnerable, component to the system. This results in all sorts of back doors and opportunities for errant code to do damage to the system. Imagine a trojan that replaces application.library with a new one that runs normally, but also snoops your inputs in order to get such things as credit card information or personal data. Extremely easy to do via this method.
Then there is the bigger problem: You are running the system, by default, in emulation. Only apps which use application.library are flagged as being native apps. This is a horrid design, and creates more overhead in the architecture than is necessary. This results in a complete slowdown due to an overload of latency-inducing checks and balances for the system. "We don't have those checks and balances" is the only answer that would mean you aren't bogged down, but then you'd be unstable as all hell. Talking you'd make AmigaOS 0.9 seem like a rock-solid UNIX contender.