I think people who have separate libraries don't have access to hardware transcoding, or prefer not to use it. That's the only reason I can see for it. My library is fully mixed, if a connection or device cannot support the resolution or codec, my server will transcode it in real time. Is transcoding the best quality? No, but if it's transcoding because a device can't handle higher quality I'm unlikely to notice the difference between a 1080p file and a live transcode of a 2160p file. We don't have a ton of TVs in the house and the main event TV is high enough quality that I'm now downloading most things in UHD.

This is the perspective of someone with a dedicated 24/7 media server with plenty of storage that is easily expanded.