Several things:
1. Having more SKUs is expensive, for everything from planning to inventory management to making sure you have enough shelf space at Best Buy (which you have to negotiate for). Chances are good that stores like Best Buy and Costco would only want 2 SKUs anyway, so the additional configs would be a special-order item for a small number of consumers.
2. After a certain point, adding more options actually decreases your sales. This is confusing to people who think they'd be more likely to buy if they could get exactly what they wanted, but what you're not seeing is the legions of casual consumers who are thinking about maybe getting an iPad, but would get overwhelmed by the number of options. They might spend days or weeks asking friends which model to get, debating about whether to spend extra on this upgrade or that, and eventually not buying it or getting an alternative. If you simplify the lineup to the "cheap one" and the "high end one" then people abandon most of that overhead and just decide what they want to pay.
The biggest thing tech people miss is that they're not the core consumers of these devices. The majority go to casual consumers who don't care about specifying every little thing. They just want to get the one that fits their budget and move on. Tech people are secondary.