Why is this variation so precarious for black?

EDIT: I meant to say "can't" in the final annotation.

i think because u get great control over the d5 square and that diangional has been weakened also a4 is an easy plan for white causing an isolated pawn

That is main line. I'm not sure about the precarious part. In a lot of lines, black will gain development by harassing whites king bishop, which gives white a lot of his power in this opening. Some oft seen manuevres for black are pawn pushes at c5, and pull the knight back into the centre, bishop at b7, and then working for a d5 break. This is a fun opening from both sides in my opinion.

Here is a fun Ruy Lopez game with a slight transposition of moves. It shows some of the common development themes from that structure with b5. Hope you enjoy it.

http://www.chess.com/forum/view/game-showcase/mr-mike-vs-mr-macintosh-g3

The main move is Nf6 as black need not force the bishop back till it is a threat after b5 the common move is Na5 collecting the bishop pair

That's a great game.

If black can force the knight-for-bishop trade, why doesn't he? Because he would be opening up the A file for white's rook and falls a move behind in development?

Check out "3....Knight d4!It's called the Birds defence and works quite well when you get the gist of it!