Purposefully limiting. The game is not expensive by any standard.
And spending resources on an extra version when you've just switched to "high gears" for the retail version isn't likely.
Seriously, if you want to participate in the beta, just buy the game. That is the condition.
You hit the nail on the head. Demos take time and resources to make. Any work done on a demo is work not done on finishing the game itself. We'd rather put all of our art, code and QA resources on getting the game done and polished. After that we can move on to the demo.
Pre-order only betas have done very very well for Stardock over the years. While I understand the frustration for those who aren't sure if they want to buy the game or not, I just have to repeat that the beta is not a demo and isn't meant to entice you into buying. Do we have fewer potential testers because of it? Sure, in a theoretical sense I guess, but there's no guarantee we'll get meaningful returns in terms of good feedback.
From what I've seen of game betas I've participated in in the past, there's a point of diminishing returns. After a certain point you may be adding thousands of testers, but for every thousand you get one person who wants to actually test, and 999 people who want a free game, hit one bug, yell "this sucks!" and walk away. Those people then judge the final retail product on their very early (and unpolished) beta experience, which is never indicative of the final product.