Well, a NEW Game Boy with more advanced graphics would continue to be a separate line with no compatibility with the DS. Sure, the DS had backwards compatibility with the 5 year-old GBA hardware, but that was no big deal (to implement). And I'm sure they did that as a selling point tp help push the DS. At this point the DS is strong enough on it's own it doesn't need that aspect to be successful (though it doesn't hurt either).
The idea, originally, was to bring out the DS and also support the Game Boy line with upgrades. Of course, it was all going to depend on how the DS did. If it flopped, it would quietly go away and a new GB would come out. If it did OK, they'd probably pursue both (the "third pillar" strategy). Since it is doing phenomenally better than they anticipated, that is making the GB concept obsolete. I doubt we'll see a new and improved Game Boy system any time soon. At the very least they can postpone that a few years. And at that point, will they bother with another Game Boy or just come out with the DS 2? I would guess the latter, but who knows.
The point is, what you are saying makes sense NOW, and that seems like the obvious path - but it was certainly never intended to be like that. And when the DS first came out it's success was very much in doubt (just read that little article I linked to in my last post).
No reason to buy a GBA? I just bought another GBA - because they were only $50 new at GR and I had credit to burn there

. It is still a better handheld to let little kids play with than the DS.