The biggest reason a banjo (or most any other fretted stringed instrument, INCLUDING electric guitar) doesn't intonate correctly all the way up the neck is because the strings "fan" out from the nut to the bridge. Simple geometry. So the inside strings are shorter than the outside strings, and the fifth string is altogether a different length. Ideally, the frets would have to be made in an arc, or the nut would have to be as wide as the bridge.Electric guitars are slightly less of a problem not because the strings "fan" out less, but because the lower string action produces less "bending" of the string as you fret it. Classical guitars intonate more correctly than banjos because they have wider nuts.Dulcimers note VERY well - they have perfectly parallel strings. There are other even less noticeable reasons for inaccuracies, such as the sagging of the bridge which allows less bending on the inside strings, or the natural bow of the neck produced by the tension of the strings, which produces more bending on ALL strings near the midpoint than at the ends, but these effects are miniscule compared to the "fan" effect.Of course, any twist in the neck will also affect intonation. I saw TWO twisted necks at SPBGMA, out of only five or six banjos I set up.

Thanks to Jack Hatfield.