It's possible to go from Nagoya to Osaka using the Takayama-Hokuriku Area Tourist Pass, but only by going via Kanazawa, rather than directly.
As someone unfamiliar to the economics or the politics of JR, why isn't it possible to travel directly (apart from by buying your own ticket)?
Does this kind of weird rule apply in other scenarios with non-country-wide JR passes?
As its name implies, this pass is intended for travelers who want to visit two areas: the area around Takayama city, and the Hokuriku region (which consists of Toyama, Ishikawa, and Fukui prefectures).
So, it covers transportation in those areas, and for added convenience it also covers the necessary transportation to access them from the nearest major metropolitan areas of Nagoya and Osaka. However, (direct) transportation between Nagoya and Osaka is simply not the point. A similar pass is the Hokuriku Arch Pass.
