The reason is Professional sports you are winning titles or you aren't doing your job. There are cases in which ownership simply wants to profit and wins come second if ever. However they cycle through coaches all the time to keep the fans coming by providing false hope. Point is it's a terrible place to go to when you have world at your finger tips in Ames. Dream or no Dream it's a bad idea, unless its in a front office, cushy job he's after. If its not the front office job he's after its just not a smart move, but he's allowed to make mistakes. He literally would not have job security issues in Ames, will have a statue, will have a final four appearance or several, in 20 years ISU will be Hoiberg, Hoiberg will be ISU period. Just like you all know who is Duke, Mich St, UCLA,UNLV etc...
Plus as CW has said, there is no reason he cant make 4 million a year at ISU. If Greg Marshall can make 3 million, ISU can afford 3-4 Million for Fred.
Now as has been speculated if Fred wants the GM job, then well the move is going to happen, and well makes sense.