Part of the problem is the low voltage conventional third rail systems use. In the UK, third rail voltage is 750V, compared to 25kV for overhead lines, so third rail currents get pretty high. You already get get pretty good arcs when the contact shoe moves on and off the third rail going through junctions. And you can't really increase the voltage very much before the rail starts to arc to ground, especially when it's raining and the insulators get wet.