The rules were changed after 1930 to ensure that primary winches etc were not situated below decks. There was no such rule initially in the 12 Metres, so the primaries etc were moved back down under the decks for a few years, until rules were made to ensure that the primaries and other winches were back on deck.
Why did they ban under-deck winches? Because from all accounts it was a horrible way of sailing. It was stinking hot a lot of the time, it made people nauseous a lot of the time, and it was impossible to arrange unless you had so many openings to the deck that the boats were dangerous as they could take on so much water.
I have no idea how you could "set and take the sails from below", but I've only run bow in one 12 Metre regatta. You already drop the kite into the forehatch.
Why did nobody seal the gap? Well, they were well aware of the theoretical advantages in the design of the Park Avenue boom etc. The idea of the low boom was part of the thinking behind the design of Intrepid, but tests by Halsey Herreshoff at MIT showed that there was almost no difference between dropping it as low as they did in reality, and dropping it all the way to the deck which was impossible anyway.
As Tom Speer notes, the wind gradient must also have an effect. Perhaps the effect of the windward gunwale and deck is often under-rated - some studies have shown lots of turbulence off the weather rail and if I recall correctly they indicate very little apparent wind around deck level aft. It may be a different area at the bow, where the boat is narrower.
Don't we also get down to the simple fact that about 50,000 gozillion hours of racing has shown that boats with slightly higher jib clews don't actually go slower than those where the jib clew is at deck level? If a vast amount of testing shows that having a significant gap at the jib clew higher doesn't matter in reality, surely it must be significant. After all, it's not as if the speed increase claimed by some theoreticians is so small that it could be ignored.
It's interesting that windsurfers used to talk a lot about "closing the gap" but these days there seems to be less emphasis on 'sealing' the gap between the foot of the sail and the top of the board. Looking at vids of the guys in the speed trench at Namibia, for example, shows them with what seems to be a wider gap than in the Rushwind sails of 25 years ago, for example.