They took it out for two main reasons, the closed cities would make big problems with levitation, and levitating would reveal so many back exits, leaving many dungeons too easy to get the end boss treasures, as the exit from the end room is usually an unreachable ledge above the entrance. Plus it does give the PC a much more mortal feel.
Edit: Spelling mistake
Those are design flaws that can be worked around with the right game engine, and the devs, having levitation in mind, shouldn't be putting in any back exits that the player can access from the outside. It just seemed like such a shame that they gave us such a cool feature in MW only to take it away. I feel it adds a lot to the experience when playing a pure mage character, as I tend to do. They could include it, but make it a very hard skill to learn if people feel it's too uber. Having a level 1 able to fly right out of the starting gates would definitely be too uber.