It is a tradition to use MS Project as a Project Management tool in Waterfall projects. However, trying to use MS Project in an Agile project makes the lives of the developers more difficult than easy.
There are several reasons for that and a few based on my personal experiences are..
1. Adding new tasks in between as they get discovered during the sprint causes havoc while using the tool
2. Tracking story and task completion in the context of sprint is difficult
3. Moving around the incomplete stories and tasks to different Iteration makes the project plan chaotic
4. Picturing Product and Sprint Backlogs while using MSProject is not so easy
In addition to above reasons, Michael Dubakov has written an article explaining why MS Project sucks in iterative development projects.