Hi Jaimie,
my guess is this: m0n0wall is often installed on embedded devices. That is the goal, as far as I can read between the lines.
Embedded devices usually have flash drives as "permanent storage". Flash drives do degrade with the amount of write accesses. See
http://en.wikipedia.org/wiki/Flash_memoryIf logging were to write to a local file on permanent storage, this would be detrimental to the storage medium. That is why many embedded linux/bsd distributions usually only write the os, applications and configuration to the flash drive (that is at best a few write operations per month), and put all other information or files into a ramdisk.
There is of course nothing keeping you from uploading your own syslog server binary into m0n0wall and then configuring the logging to use the syslog server on the host "localhost".
Hope this helps in answering your question, and please be nice to your flash drive
Cheers,
Stephen