Coarse graining of dense liquid-state systems can potentially lead to fast simulation times, thus providing an effective bridge between atomistic and continuum descriptions. Dissipative particle dynamics (DPD) is a stochastic Lagrangian method that provides a simple formal procedure for coarse graining. Here we analyze some of the fundamental modeling ideas of DPD and identify three factors that limit its application at high coarse-graining levels: interparticle force magnitude, compressibility, and geometric confinement. These artifacts lead to erroneous transport properties of highly coarse-grained DPD systems and thus incorrect dynamics in simulating complex fluids, e.g., colloids and polymers.