would the light coming out of a highlight not be diffuse light? scattered all over?
Yes it is, but that isn't really the issue.
The real issue is that because the design of the Hi-Lite allows the subject to be placed very close to the subject, people do just that - my guess is that most people buy it just because they don't have room to have the subject well in front of the background, and in any event Hi-Lites aren't very big so they can't have people very far away anyway.
With backgrounds lit by reflected light, people have to be some distance away, otherwise there's no room for the lights.
Light follows the principles of the inverse square law, losing power rapidly as it travels. If the subject and background are very close together then very little lighting power has been lost by the time that the light from the background reaches the subject, therefore it can easily destroy fine edge detail (hair mainly) and can cause flare.
The problem is amplified by digital cameras, because small digi cameras don't cope well with extremes of contrast, compared with negative film, and the problem get's even worse when people cling onto the 'principle' that was common when everyone was using film, that a white background needs something like 2 stops of overexposure to make it white. With digital, a half stop of overexposure is normally enough provided that the lighting is even, 0.7 of a stop is definately enough, more is likely to cause flare and edge degradation.
That's my view, I'm sure that others will disagree...