Why are "he", "she", and "it" distinct in the singular, but all "they" in the plural?

Old English not only had many plural personal pronouns, but it also distinguished between the nominative, accusative, dative, and genitive cases. See Wikipedia.

By about 1400 they (which was originally a masculine plural demonstrative pronoun borrowed from Old Norse) gradually replaced these personal pronouns.

There are other languages that have cases more analagous to the English system of distinguishing gender in the singular, but not the plural.

In the singular, the complication doesn't arise of which pronoun to select when the members of the group referred to aren't all of the same gender. However you distribute the usage of, say, "ellos" and "ellas" (or, more notably, "nosotros" vs "nosotras", where there seems to be more variation in usage) when applied to groups of a mixture of sexes, one word in the pair is liable to be used a smaller fraction of the time, hence the chance for the other word to "oust" it.