Because it would have increased the cost to produce the box. The 612 was designed to be Dish Network's multi-HDTV household solution for those who have 3 or 4 HDTV's and want true HD on each of their HDTV's. At first Dish leased up to 4 612's for HDTV on 4 TV's. I believe the new limit is 3 TV's.
In order for Dish to be able to afford to "give away" four HDTV DVR's, they had to cut the cost of producing them. Therefore, Dish eliminated the following:
2. Independent 2nd TV experience (no Dual Mode)
3. Large HDD; Instead a lower capacity HDD for 35 hours HD in the 612 instead of 55 hours in 722.
Essentially, the 612 is an HD version of the old 721, except the 721 did have PIP.