It looks like they could have built a shorter bypass and upgraded US 87 to a freeway. There are even frontage roads along part of it.
I was living out there when they were finishing that section up. I never heard the exact explanation as to why. I guess they knew they couldn't go through Canyon or Happy and there might have been some NIMBY issues somewhere along the way. Maybe there were fewer issues with adjacent landowners when they decided on the resulting route vs. any other that might have been considered. I haven't seen any preliminary drawings of other considered routings, if there were any.
I suspect the present I-27 alignment was chosen because it was cheaper in terms of land acquisition. If it were built on top of existing US 87, there would have been steep ROW costs through the urban commercial/light industrial areas along US 87 south of the present US 60/US 87 interchange. Having I-27 rejoin the US 87 corridor at Happy ensures that routings around Canyon are no longer via I-27 than they are via US 87.
Another possible explanation is that TxDOT decided to reserve I-27 for rural through-through traffic, and not to allow it to become a commuter freeway for every minor center it passes through. Besides the terminus cities of Amarillo and Lubbock, I-27 passes by rather than through Canyon, Happy, Tulia, and Plainview, and in those cities local traffic service is provided by US 87. I-27 does pass through Hale Center and Abernathy but they have just one and two exits respectively.
Maybe Terry Funk objected? :-P