For the same reason companies make SoCs. It saves money. Intel's idea with EMIB (multiple dies in one package) is to save money by using older semiconductor process for things such as the southbridge (ex: USB) that don't need the latest and most expensive process. This way, they'll also get more value from their investment in previous process nodes.

Routing HBM to the GPU using PCB traces is expensive, and in the low-to-mid end, saving money on PCB and cooling matters. If EMIB is going to be used anyway, why not have the GPU in there as well. With 1024-bit 4GB HBM on package, memory bandwidth won't be a problem, and the i7-8809G will likely be faster than a PS4, which means it'll be good enough for 1080p gaming.

KabyLake was probably chosen because this design was finalized before Coffee Lake. The next iteration will likely have more cores.