Magne-traction was mostly a marketing gimmick, it's great for picking up ferrous debris near the tracks. Amen on the All-Nation reference! I'm not sure that any Lionel loco had rubber tires while Mr. Cowen ran the company.
I think the impetus for rubber tires was a switch to lighter, plastic-bodied locomotives, and also the introduction of graduated trestle sets that result in action-oriented "over & under" layouts for kids. That's a great idea for a road racing set; for a loco hauling cars, not so much. As a layout designer I wouldn't mind having a lower level for hidden staging, but it's better to just not have that steep grade. Ultimately it's a devil's bargain, and rubber tires are a price that I would choose to avoid (if I could!)