Probably because they have been unable to produce fighters of this calibre and presence, the WKF decided that karate needed to be made more spectacular and easier for the general public to understand so that it's success (and the survival of their organization) would be assured. They were aware that judo virtually disappeared after it became an Olympic sport because the rules necessary for it to be accepted as a sport made it extremely boring to watch. They resolved to avoid the same fate. The result was a set of regulations that have turned a once highly effective form of self defense into a cheap spectacle - a move that ultimately guarantees moderns karate's failure as both a sport, and as a martial art.
Taekwondo took this route long ago, and may have indeed inspired the WKF to move as it did. It achieved Olympic status by claiming to be a sport, and perhaps, in the time honored tradition of the Olympic Movement, "persuading" an official or two to vote in it's favor. One wonders whether it was worth the effort or the money. Olympic taekwondo is embarrassing to watch, and the taekwondo movement appears to be sinking into a cesspool of graft and corruption of it's own making. Despite it's status as an Olympic sport, or probably because of it, we see more frequently than ever in the pathetic performance of it's "athletes", the results of diluting something that was weak to start with.
It is interesting to note that as the Olympic karate movement has progressed, (if that is the right word), the ratio of officials to competitors appears to have increased dramatically. Furthermore, according to it's critics, while they seem able to send any number of officials to international meetings, they are frequently unable to provide funds to send athletes to compete overseas. This, according to one insider, has led to instances in the past where the "National Karate Champion" by elimination (who did not have the funds to travel to the competition venue) has been replaced by a competitor he had vanquished in the finals, who did!
What Olympic karate devotees are studiously ignoring is the fact that it is highly unlikely , some would say impossible, for karate ever to be admitted to the Olympic games. Taekwondo, backed by the entire resources of the Korean government, for reasons of national pride will fight tooth and nail to prevent it. When the communist Chinese host the games in a few years time, as is their right, they will introduce wushu as a new Olympic sport. At that point the Oriental combat category, for want of a better description, will be filled. As the Chinese and Koreans will continue to strenuously oppose (Japanese) karate's entry into the Olympic games, and as Olympic officials are already reducing the number of sports included in the Olympic games, the fate of competition karate appears to be sealed. The only possible solution would be for karate to enter as a sub-category of either taekwondo or wushu, an unlikely scenario as this would dramatically reduce the number of karate officials needed. As it is these very officials who will benefit most from Olympic karate, this act of political suicide is hardly likely to happen.