People don't like to lose.
You could have only one fully populated world, but with only 64 of 324 teams making the tournament each year, people would get frustrated and start quitting very quickly. It the name of realism/marketing, they tried having every team, but I don't think it makes much sense from a gameplay point of view. Div II and Div III would be much better served if they only had about 192-240 teams. About 50% of the teams would make some sort of post-season and fewer automatic bids would go out to bad teams. You'd probably have about as many coaches as you do now, but more tightly packed, leading to more excitement.