Doesn't it also restrict blood flow to the placenta and affect how much oxygen the baby gets too?
It would probably depend on where the placenta is located. In most cases it wouldn't make a difference. There are probably some times that it would, BUT the mom would still wake up when her blood is restricted, so the constant flipping back to her side would then "fix" that problem as well. Honestly, depending on where the placenta is, laying on your side could pose a problem too you would think. You have to keep in mind that women have been having babies for thousands of years, and only very recently has this "don't sleep on your back" thing even been brought up.
I was more thinking that the large blood vessel being restricted goes to the placenta...but I see what you're saying too. And yes, woman have been laying on their backs for thousands of years and were 'fine'.