Why can't I use a GO in a stored-procedure?

A. GO is not a T-SQL command. It is a batch delimiter but it is parsed and processed by the front end query tool - e.g. ISQL, OSQL, ISQL/W etc.

When the front-end sees a go it sends the previous batch of SQL to SQL Server for processing. SQL Server never sees the go command and wouldn't understand it if it did.