Why do people use regular ND filters when there are variable ND filters?
As mentioned above, two pieces of glass = more flaring, less sharpness, etc. than 1 piece of glass. Dunno about cheapness.. VNDs are actually significantly cheaper in my experience.
Additionally:
1) They have more color cast than flat single density ND filters.
2) They ALL show an "X" pattern in your image. Even $400 sing ray filters, under the right conditions. The X gets stronger at higher densities, and wider angle lenses, and it's worst in scenes with lots of polarized light, like sunlight through a clear sky. The $400 one might only show an X at 8-10 stops, and 14mm lenses, whereas a cheaper one might show an X at 5 stops and 35mm lenses.
Here's an extreme example:
Why are my results with a variable neutral density filter poor? - Photography Stack Exchange
and a comparison of the interference "X" between cheap and expensive brands, part way down this page:
An In-Depth Comparison of Two Variable Neutral Density Filters - Tuts+ Photography Article
3) Also due to polarization with wide angles, your sky will show undulating brightness. To see it, you have to have a lens with an angle of significantly more than 90 degrees. Like a fisheye or an UWA. Here is an example from a single polarizer:
http://i.stack.imgur.com/eceIU.jpg
I'm not 100% sure what the cause of the "X" is, but I
believe it has something to do with the gap between the two pieces of glass (and also just their thickness) in a VND, and the fact that light from the slightly different corresponding angles is polarized differently. In other words, the spot on the glass that light passes through the first filter is a little off from the spot where it passes through the second one. Since polarizers affect light non-uniformly across their surface, this means that you'll get extra lightening or darkening there, depending on the angle in the scene. So you get interference patterns. The difference in angle over the gap gets stronger with wide angles (which pack more degrees of angle into the frame), and with cheaper filters that have wider manufacturing tolerances. But never goes away.
It might also have to do with the same effect as in #3 above, but twice, at 90 degrees to each other, making complicated patterns.
In any case, this is not an issue with single glass, since it is uniformly tinted all the way across, has nothing to do with polarization, and angle doesn't matter.
I remember reading somewhere that VND filters are just stacked polarized filters... does this mean that they can just be used as polarized filters on the 'lightest setting'?
Yup. HOWEVER, in all the VNDs I've ever used, one of the two rings didn't move. So you would only be able to use it like a polarizing filter at that one angle... which isn't super useful.