Penalties decrease player involvement and cause disengagement and consequently create bored people. Not what you want.
I have to disagree with this, especially in a game that's story first. In "heroic" power-gamey games taking penalties sucks hard, although I don't think I would ever say they made me bored, but in games like AW (and as another example, something like Mouse Guard) I have never
felt bored, uninvolved, or disengaged when I had to take a penalty due to circumstances or trying to do something I was bad at, or whatever. In a story based game, penalties simply highlight our failing points, and when failure is intended to drive the story forward as much as success, that can't be a (only) bad thing. There is, in my mind, a significant difference between rules that make you suck and simply being bad at some stuff or having to take a penalty when you fail.