[Christ]

Stability... if you add pure oxygen, the mixture could lean out excessively with very little pressure in the lines, which could cause a serious problem... that on top of the fact that Oxygen alone isn't specifically stable, and reacts with just about everything it touches.

Adding Nitrogen to Oxygen stabilizes the elemental oxygen so that it doesn't react with other gasses before entering the combustion chamber, and since nitrogen is mostly inert, it actually helps to cool the cylinder during N2O use, to prevent hot spots and detonation.

With a hot enough combustion chamber, you could actually use steam as an oxidizer... but you'd have to get the chamber hot enough to distend the bond between hydrogen and oxygen, and then you'd end up with quite the machine... water for fuel, actually.