An Honours component is typically shorter in duration (1 year) compared to a Master of Research, which typically has a duration of 2 years. This may constitute one factor that pushes students to complete an Honours component instead of a Master of Research. Additionally, the fact that some universities offer integrated Honours as part of their degrees (consider a Bachelor of Engineering for example) means that an undergraduate path of the sort is more convenient for students since they will not have to apply separately to complete an Honours component and will not need to complete specific Honours units.
A potential advantage that a Master of Research has over an Honours component is international recognition. A Master of Research is typically considered an internationally recognised pathway into PhD study. While an Honours degree/component is recognised in Australia and may be perceived as "prestigious" as you mentioned, it typically has limited international recognition. Where this becomes relevant is if a student intends to pursue further study outside Australia, possibly making the Master of Research a more viable option.
I hope this helps!