While I’m no audio engineer, I think you’re basically on the right track 😛
My understanding is, basically, you want everyone to be able to hear the whole song. If you think of a reasonably sized stage, if you run it in stereo everyone not at the center of the venue is going to only be hearing one “side” (R/L) of the song. If, say, you have some panned hats in the track the people on the right side of the stage would be hearing different things from people on the left side of the stage.
What you really want them to be hearing is everything! To do that, smoosh everything into a mono space to solve the problem.
I’m sure there’s lots of other reasons for it as well, but this is my limited comprehension of the situation.