Why not update the game state every millisecond? Or when any action is taken by any player (which is what the subtic thing sounds like)?

Updating the game state every millisecond on the server would cost too much resources without a tangible benefit. 64 tick to 128 tick doubles the CPU usage while decreasing the time between each calculated game state (tick) by 8ms. Updating every 1ms (1000 tick) would have 16 times your CPU usage compared to 64 tick. E.g. if you currently have 320 fps you'd only have 20 fps.

[what's] preventing it from being done that way? Bandwidth? CPU speeds?

Exactly. If people currently have a varying ping or packet loss, increasing the tick rate would male their experience worse. It would also be worse for anyone matched with those players. This is already the case with those players that have jittering movement.