Samuel Adler, in his book _The Study of Orchestration,_ says that:

   "The major reason instruments at different transpositions were used
   was to avoid too many accidentals before the mechanical systems on
   these instruments were perfected."

The New College Encyclopedia of Music says that one reason for transposing
instruments' existence is to avoid "large numbers of leger lines."
Transposing instruments also help people like clarinetists by allowing them
to avoid different sets of fingerings for their Eb, D, Bb, and A clarinets
(not to mention the basset horn in F).

My 1945 Harvard Dictionary of Music says:

   "The use of transposing instruments or, more accurately, of
   transposing notation, dates back to the period (18th century) when
   only the natural tones were available.  With the introduction of
   valves and keys the difference of facility in playing in the various
   keys was greatly diminished, and eventually almost completely
   eliminated.  Therefore, from the present point of view, the transposed
   notation must be considered as inappropriate and antiquated.  Its
   abolishment is particularly desirable from the standpoint of the
   orchestral conductor and, still more so, from that of the layman for
   whom the presence of six or seven different types of transposed
   notations offers the chief obstacle to the study of orchestral scores.
   Yet, contrary to the general progressiveness of our time, the transposed
   notation has successfully maintained its traditional place."

I have a theory book (Benward and White's _Music in Theory and Practice,_
I believe; it's not available to me right now) that claims that transposing
instruments are no longer necessary -- we have the technology to create C
instruments of any kind -- but the kind of large-scale change that would
necessitate would require people to buy new instruments and all music
publishers to reprint old music.  Although it seems like that would be a
great way for publishers to pick up a few extra dollars, I don't think
orchestras would like it very much.  In one fell swoop, it would make
obsolete several hundred years' worth of music.

Sorry for the long post -- hope this helps!

Jeff Grossman
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 [Sure does.  Makes perfect sense.  Thanks, Jeff.  -Dave]