Because there's only so many different ways to cut someone. Admittedly using a sword with a blade that has a 360 degree edge opens up a lot more possibilities. But in the end, there's still only so many different ways to use a sword. (Since I know someone's going to point it out, I'll go ahead and say it: Yes, the number of ways to use a sword combined with the variety that exists in sword design means that the "only so many different ways" is a
very large number. But it's still finite. And I'd point out that there is greater variety in metal sword design than there is in lightsaber design.)
So, if you want a more "in universe" response, I would say it's because most jedi
didn't use it. While they may know that it exists, few were actually trained in it, and they certainly weren't used to facing an opponent using it.
And very few Sith
only used Form VII. Almost all of the forms built on, or were a response to, the form(s) before it. Yes, Form VII was favored by the Sith, because that combat style most closely fit with their overall philosophy, but there were variations developed by the Sith on all of the forms. Most were small, simple changes such as bringing a cut from a slightly different angle. If your opponent recognizes your style and "knows" what's coming, even a change of 5 degrees in where a cut comes from can bypass a block and land.
And there's the simple intimidation factor. Knowing you're facing an opponent that uses a form that few jedi ever get to the point of learning, much less master, can cause unease in a jedi, if not outright panic in younger, less experienced ones.
Finally, why
woouldn't the Sith use it? Even if they were to develop completely new forms of combat, that doesn't mean they'd get rid of what they already knew worked.
If you haven't already, go here:
http://www.saberforum.com/index.php?topic=2131.0 , follow the link in the first post, and read a very well written treatise on the forms of lightsaber combat. Also, I don't think it was a dumb question.
