According to my Italian text book (© 2006), it is more common to use "con il" etc. in modern Italian instead of the combined form. It is not wrong, though.
I think the rule of thumb is "whatever sounds better." We do the same in English. Col pollo sounds "crappy". It's like the difference between "in il piatto" or "nel piatto" "nel piatto" sounds better.
as far is i know it's because italians see a plate as something that's not completely flat and therefore stuff is not on the plate but in the plate. you can't compare that to con il/col.