Horns: Why don't they image well?

Well, you can always just put an old JBL C-31 in one corner, and forget imaging.  The music will still be there in the room with you! :-)

 I have owned apogee divas in the past which were pretty much one of the best imaging speakers I’ve ever heard. Now I own a 604E based system with Fostex tweeters on top and DIY dual subs on the bottom. True full range. They image just as good as the divas.   In fact they almost do a dense ball of sound image in the middle even better.   And they throw sound well outside the boundaries of the speakers as well. I partially attribute that to the tweeter horns dispersion pattern which widens it out a bit more than your typical dynamic driver. 
 Also voodoo funk  in advertently brings up a great point, the room has a huge contribution to how well the speakers will image. 
 Essentially a horn or wave guide couples the driver to the air better than without. I can’t see how that would be a bad thing in anyway. 

Most people's experience with horns is limited to VOT. VOT horns were designed for movie theaters and other such large rooms - not for your average living room.  A properly designed and built horn system can and does image realistically well. My experience with horns comes primarily from my long association with Dr. Bruce Edgar (Edgarhorn) who designed and built some of the finest horn systems I've ever heard. I've "rolled" some of my own and I assure you that they sounded and imaged remarkably well, too. If you're anywhere near So Cal I urge you to get in touch with Cyrus Brenneman (I can help) who has an exceptionally well sounding horn system based on Edgarhorn. Be prepared to be amazed. 

I love my Heresy III , unfortunately they've been boxed up for 6 months...  just got them to my new place and am picking up a nice BDI rack in the morning...  can't wait to fire them back up this weekend.   They sound way better than that Altec blutooth speaker I've been using.

Anytime you use a giant waveguide to spread high frequencies you are trading off a large soundstage (flat power response) with less precise imaging (since the highs are getting stretched over a wider area).