I've just been reading about a new drop-in replacement for the RC4 stream cipher, but why develop new stream ciphers when AES can be made into a stream with a little XORing?
The biggest reason is performance. Stream ciphers are generally faster than block ciphers and perform fewer operations. Stream ciphers only need to generate a pseudorandom output while block ciphers need to be pseudorandom permutations. So when you create a steam cipher out of a block cipher, you are doing a lot more work to get the same effect. To get an idea, look at how much more work is required to encrypt 16 bytes with AES than RC4.