The road games are a different story but there is NO REASON Iowa State shouldn't have been favored by a few points in 1999 & 2001.
Maybe Hawkeye bettors are an irrational group (really!) and always bet on Iowa. That being the case, why would the bookie give them points by making us the favorite?
Like you said, it's more a function of balancing the money than predicting the outcome.