It's psychological. Paper money, even as low as a $1.00 bill, is "real money". Coins are "chump change". Changing the $1.00 bill to a $1.00 coin psychologically demotes the value of a dollar to the "chump change" realm.

I suppose one could argue that a dollar is chump change nowadays, and I'm sure it is to my grandchildren, but we codgers tend to stick to the values we learned in our childhoods, when Mom and Dad passed out coins like they were candy but reserved the bills for "real" stuff. Maybe our descendents will do away with the $1.00 bill after we're all dead, but I doubt it will happen while boomers are in charge of the mints.