We do, actually
Currently #2, #3 and #6 on our official track list are songs in Danish (and #8 is in Swedish!)
But as much as I would love to hear more native languages in Eurovision, I think that reintroducing the language rule would be a step backwards.
As Matt writes, the music market has changed - a lot of young Europeans mostly listens to music with English lyrics. A language rule in Eurovision will not be able to change that fact.
If the language rule is reintroduced, it will be far more difficult for Eurovision composers to get a breaktrough. I doubt that songs like "Fly on the wings of love" or "Satellite" would have been hits, if they were sung in Danish and German.
Bringing back the language rule would also give certain countries some serious disadvantages. In my ears, languages like Dutch, Danish, Icelandic and Finnish doesn't sound very beautiful, while e.g. French and Spanish does.
Not to mention the big advantage UK, Ireland and Malta would get (like in the 1990's - anyone remembers Ireland's three consecutive victories?)
For me, it's a question whether Eurovision should be a contest in popular music or a niche show for fans.