REP as a collateral type for Maker causes problems with REP’s security model and valuation because you have a “snake eating its tail” situation. REP’s value comes from future return on DAI, and DAI’s value comes from a guarantee that it can eventually be redeemed for 1 USD worth of REP (ignoring other collateral types for the moment). You can see that this creates a vicious feedback loop where if REP tanks sufficiently (e.g., causes the system to go slightly underwater) then the feedback cycle will result in both REP and DAI going to zero very rapidly. This is easy to visualize with REP as the only collateral type, and while having other collateral types will mitigate this risk, having REP and DAI values linked makes doing security analysis on REP much harder.

If Augur v2 ends up trading with ETH instead of DAI, then this isn’t a problem (though then REP is to correlated with ETH to be useful for Maker).

This problem is further complicated by the fact that REP is a token that is designed to fork, and when it does its value goes to zero almost instantly (a new token takes on its value).

Even if you ignore the first problem mentioned above, the forking issue is a pretty big problem for a collateral type. A good type of collateral is one with a low probability of going to zero suddenly (black swan event), but REP’s value goes to zero by design anytime a fork happens.