There are three simple reasons that square facings are far better than rectangles. Five foot step, diagonals and slow. The best creature to illustrate this with is the Dire Tiger, which has a 3.0 facing of 10x30 and a 3.5 face of 10.
First off, with rectangles, if the dire tiger wants to take a five-foot step to the right with its front half (in order to stay threatining the fighter), but needs to take a five-foot step to the left with its rear half (in order to threaten the barbian), can it take a five-foot diagonal shift? How do you assign which squares it occupies and which it doesn't on a angle like that? After you go through to trouble to orient your dire tiger like that, it suddenly bites the rogue in the doorway with an attack out of its' middle? In 3.5, it is very clear that square areas stay squares. A five-foot shift shifts the entire fighting space and no angling would be allowed. Either the dire tiger an shift it's square to threaten two characters, or it can't. When it suddenly bites the rogue in the doorway, there is no conceptual reason its' mouth couldn't have been facing that way.
Second, corners and diagonals. Picture the 3.0 dire tiger in a ten foot wide corridor. If it comes up to a t-intersection, how does it turn the corner? How do you count the movement? Some squares obviously move more than others do. What if it is fighting around the corner? Which exact squares should it occupy? What if it wants to go through a doorway to its side? No facing means it shouldn't need to back up, but does it just ooze through and reform in the new corridor? How much movement does that take? With 3.5 square facings, the tiger stays square. None of those problems even remotely exists. Not to mention that a 3.0 dire tiger cannot go down a 5-foot corridor to save its life, but a 3.5 dire tiger can. Admittedly, the 3.5 dire tiger is much smaller, but even if it were a 15-foot face, it could still get down a 5-foot corridor using an escape artist check.
Then there's effects like slow, which reduce you to a partial action in 3.0. This post is getting long and I don't feel like going into too much detail, it repeats a lot of the logic above. Suffice to say that if a creature with a rectangular base cannot move, it becomes even more bizarre when its bite attacks come out its middle.
One last word. Psion, you said it was stupid that two people fighting a horse couldn't get closer than 10-feet to each other? Have you ever been around a wheeling horse? You can move closer to each other , but if you enter its square, be prepared for its attack of opportunity on you.