As the display is usually multiplexed it would be very hard to do it othervise and get a steady display with no flickering.
if you do not multiplex, it is rock steady.

Actually the conversion from digits to the actual segments is best done outside the interrupt.
why, a table lookup takes a couple of microseconds. I would do it 'outside' if I had plenty storage space (a rare event with a '51) but the 'penalty' is so small that these bytes would be among the first I saved.

This means that You have all the time in the world to fill in the segment buffer which would not be the case if You allow the interrupt to do this task.
why do you need "all the time in the world" to do
movc a,@a+dptr (two instruction cycles = 2us on a 'traditionl')

Thee is nothing 'wrong' with doing it ouside the ISR, but why the many words about two lousy microseconds?

Erik