Why aren't Stepper motors used in closed-loop systems and PID control?
The main point of a stepper motor is that you get discrete steps.  However, the cost is larger size and lower efficiency than a continuous motor of the same torque.  Stepper motors also have a low upper speed.

The advantage of discrete steps can outweigh the various disadvantages when the system can be controlled open loop.  If you're going to provide feedback and close the loop anyway, then the stepper motors gives you the worst of both worlds.  You might as well use a position encoder with feedback, or a motor with position feedback (like some brushless DC with Hall sensors).

Added

As Dmitry pointed out in a comment, a control loop around something that can only be adjusted in discrete steps can very easily lead to oscillation.  The system will continually dither between the two steps adjacent to the exact answer if there is any undamped I response.  When the discrete steps are mechanical, that can cause higher power drain, wear on the parts, and undesirable user experience.