Why doesn't Ubuntu support this?

ksplice is not free for everybody, just free for users to install in their system. Also ksplice does not update everything, it is mostly small security patches. ksplice is not at all affiliated with Ubuntu or Canonical, which would make integrating it very difficult and even dangerous for the distribution.

The process to create a system from scratch for inserting updates into the kernel is non-trivial and not really supported from the kernel developers, which in general most distributions try not to move too far from vanilla. Creating the actual updates themselves is also a possibly time consuming process (especially testing them). The updates installed by ksplice (and theoretically some homebrew service) are not actually pressed into a kernel, that is to say at reboot the updates are not applied until the ksplice service and modules are loaded again, this can affect performance negatively. Windows supports a very similar technology, but Microsoft does not use it and forces reboots for many of the same reasons.

It is a great product and neat technology but will probably be a while before it is actually integrated into a distribution, if ever. It is very well suited for servers where uptime is a huge issue and admins still want security updates, but for the general desktop user it is not really worth the overhead and rebooting is not that huge of an issue. I think the largest thing to expect is maybe getting it into the repositories for users to download from there.