Thanks everyone for the comments: and let me start by being clear - I love lugs too! Mostly for the look - they add tremendous interest to the frameset. So the question was rooted in the engineering question: are they only for show or is there a functional reason they need to be there.

The responses were pretty clear: A good builder can, with modern materials and equipment, make a very viable frame from steel without lugs, while driving weight down and not compromising strength or stiffness.

I agree motorcycle frames tend to be heavier tubing that can stand welding, but as at least one other poster pointed out there are racing mc frames made with very similar tubing to what we find on our bicycles (proportionally expensive too!). Daspa in Italy made some amazing, lightweight, stiff (and fragile) frames for NCR to use in endurance racing as far back as the 70s. A 12 lb frame to contain over 100hp at 150mph is an amazing feat of engineering, with absolutely stunning welds and no lugs....

Anyway, thanks everyone for the input!