Here's why:
People willing to buy an apple tablet for $500+: 10000
People willing to buy a smaller apple tablet for $400+: 15000 (A very, very small increase. Not nearly enough to turn a profit. Extremely limited exposure to new customers)
People willing to buy a smaller apple tablet for $300+: 40000 (A reasonable increase, maybe a break-even on profits/expenses, an average exposure to new apple customers)
People willing to buy a smaller apple tablet for $200+: 120000 (Huge increase, probably still not a huge profit, but more than the other two, and it would include a massive exposure to new customers)
The cheaper the iPad mini is, the more barebones it will be. Like cigarettes. If you got hooked on the cheap, low quality ones (iPad mini), you would want to upgrade to the expensive ones (9" iPad). But if you were already hooked on the expensive ones, and you tried to downgrade to the cheap ones, they would suck in comparison, and the large majority would go back to the expensive ones.
Apple doesn't want to sell less full sized iPads, because that's where the big profit is. People who go from the iPad to the iPad mini are going to complain and complain at the lack of performance, but people who go from the iPad mini to the iPad will have nothing but good things to say.
Buy an iPad (+100$ for apple), sell it and buy an iPad mini (+50$ for apple), realize it sucks in comparison then sell it and buy another full sized iPad (+100$ for apple and another $100 for each furture generation upgrade)
Rather than: Buy an iPad (+100$ for apple), sell it and buy an iPad mini (+50$ for apple), realize the iPad mini is awesome and only buy upgrades for it (+50$ for each furture generation) The additional $50 would make a world of difference with the size of apple's audience. An additional 50 million dollars every million customers.
They make more money off of the expensive device, they don't want people downgrading. After the keynote they want this to happen:
People who own a current iPad: "Those are terrible specs, i'm sticking with my expensive iPad"
People who do not own an iPad: "It wouldn't hurt to try it out at that price"