I think McIlroy missed the mark here. Single points of entry, and tightly-coupled code, might be reasonable criticisms of Knuth's personal style, but I don't see them as inherent limitations of the LP approach. You could write multiple useful, interesting narratives about a library's core elements -- algorithms, data structures, etc., -- and then write a simple appendix documenting the entry points / API. The style itself doesn't have to get in the way of good program structure.

My own critique of LP is really more about the act of writing itself. Many people, programmers included, just aren't skilled at it! Knuth's literate programs are interesting because he's got something interesting to day, and his writing style is engaging. But I wouldn't enjoy having to read (or maintain!) a literate program that was written by a poor writer in a dull, meandering style.

Also, Knuth seems to think that the literate style ought to make us into better programmers, simply because we're writing prose along with the code -- that the combination somehow unlocks a better understanding of the problem, how to solve it, and how to explain it to others. That sounds inspiring, but I'm not sure it's really true in the general case. Perhaps more research is needed to find out. :)