Yeah, I don't know the exact reasons he left, but what he said was that Knute Rockne's career wins record was sacred and he didn't want to break it.
Whether that was the reason or not...if it was, not much ND could have done.
Not sure what the answer is for the Irish. Academics too high (meaning, most other places are too low) combined with playing in cold Indiana, along with the fact that ND name isn't quite what it used to be. Its tough to compete in talent with teams like USC, Florida, Texas, etc...