To cut 60 minutes they would have to take out more than the charming musical interlude.
Well, the MAIN reason I believe this is:
they could make more money with a DVD release of Barfly plus one of the Buk-Tapes (complete). So obviously there was a problem, maybe in terms of copyright. I dunno.
I remember, there was a VHS-Tape-version of the 'BUK-Tapes' in Germany - With the subtitles (which weren't bad btw).