Why? Naivety. He wanted it to be bipartisan. This is about as in the middle as you can get, and it wasn't good enough. It wasn't just watered down for the blue dogs or Lieberman.
I mean, ok. But, if Lieberman (the 60th vote) was willing to vote for something farther left (hypothetically), why not remove that stuff once you realize it won't get republican votes?
I'll agree that Lieberman played a large role in the death of the public option. That said it was eleventh hour and further changes to the bill would require more time to rectify, and Republicans were still involved down to the wire, even if they didn't vote for it.
Why would they try to appease people who weren't going to vote for it?