Because Turtle WoW was WAY too far down the development line for them to just "take it over." And Blizzard will NEVER have WoW be developed by an outside studio. EVER. This is just private server cuckold tears.
As to the "Never compete with themselves," that doesn't really apply here as there have been more people quit WoW than currently play it. They are trying to win back some of that lost audience. So they don't really see it as competing with the current Retail offering.