I agree with your fundamental point OP. If the government allowed us to contribute as much to an IRA as we can to 401k's then I would imagine it would force 401k administrators to actually provide good funds in 401ks.
But I think Indexer has the right idea. Laws aren't necessarily logical. There is some reason that they were passed at the time, but it may not make sense now when you put it together with other laws that have passed.
Also, I recall from the documentary "The Retirement Gamble" that the 401k used to be used as a high income corporate tax dodge, and pensions were the norm. Then some companies decided that they want to pass the burden of retirement from the employer, who had to maintain the pension plan, to the employee, who had to manage the 401k.