1) this isn't looking in a mirror, people are not looking at themselves but at their creations (many roleplayers create/play as characters completely unlike themselves)
2) third person viewpoint gives players a better view of such things as the character's stance and surroundings, how close people/things are, their footing (their feet), etc
3) see other posts for people who suffer from "motion-sickness" from first-person view point (I believe it is caused by the perception of movement without actually moving)