Couple of reasons, really:
-
The game might still change after the first demo release, creating a little confusion. Confusion which generally would be more likely to be dismissed if a free game (in my opinion).
-
While you might build hype initially with a first demo release, the hype will tend to go down over time. With the potential loss in hype, it might take good communication (and a bit of extra work) to keep people who would want to buy the game interested until the full release.