Why having the fantasy version of the UN, with all the ensuing political intrigues, would have meant a more shallow plot? If we look at the Kalamanda arc, we see a good story which makes use of this very "restriction" to deliver a rather intriguing plot arc in which we get the so craved character progression they aimed at being able to deliver with the retcon.
I'm not saying the retconned lore is not apt to deliver what they want, I mean that the old lore could do that too and (here is a personal taste) was more original.
The IoW and its members were not omnipotent and the JoJ has many instances of this: they didn't know Malzahar and Kassadin would clash and didn't stop them but the second time they battled and only because they were doing it near their facilities; Jarvan IV was the target of an assassination attempt schemed and executed by Swain within the very IoW and High Councilor Vessaria Kolminye arrived when a pretty violent fight had already taken place; the IoW's higher-up involved in the Kalamanda conspiracy got his plot revealed and was apprehended before he could seek asylum in Noxus.
This is just to argue the IoW was not only a restriction, but a possible plot device. For instance, if they started where they left, there was "outcry against the Institute of War in the streets of Demacia and Noxus" and all this could have led to the IoW facing a difficult political moment, with city states withdrawing part of their support. All this could have led to a weakening of the IoW's hold on some dangerous beings, like Brand and Nocturne & co.
I don't mean they should have gone with these stories, but it's a proof that plot could progress even with the IoW there. It was as much a restriction as the Ministry of Magic is a restriction for the Harry Potter saga.
Of course with the retcon of everything they opened up possibilities, because basically there is no lore right now for a major part of the world and its characters. Now comes the problem: they announced a retcon when they had no material to ship. It's been more than a month since then and we've got two stories for two champions out of the multitude of those for whom the IoW was a core part of their background (see Jax, Fiddlesticks etc). It was all extremely bad timed and that is the biggest remark that's been done.
The IoW may have been born because they wanted an easy way to get story into the game, but as they built upon it for two years it was no bandaid anymore, it was actually the very core and pillar of the LoL's experience. We are called summoners for a reason, the Influence Points are called that way for the same reason, the only true stories seeing characters' progression developed for the game were in the JoJ and in a setting with the IoW. As others pointed out, Noxus waging war against Ionia made logistically sense because at the boundary between Noxus and Demacia there was the IoW; without it Noxus sent its resources on a far away island opening itself to Demacia's possible aggressions. Since, if pieces of lore not involving the IoW stay canon as they said, there were precedents involving Jarvan IV, Swain, Garen and Urgot taking part in battles and their consequences (like J4's avoided execution and the subsequent death of Urgot), there's no real reason for Demacia not wiping them out while they were focused elsewhere.
Besides, without the IoW, how does Ionia come out of the Noxus occupation?
The point is: messing the timing on all this has made so that they opened a number of plot holes higher than the number of issues they wanted to fix.
This is what I meant by "it was sufficient, not necessary": they could have reached their goals with the old setting too, so it was not necessary to retcon, but surely retconning is a sufficient condition to achieve them because it gives you a blank state to work with. The cons being that, messing the timing, you have a game with no coherent and solid lore for a whole lot of time and if Riot's past lore deeds are to be kept in mind, then it could be years of such a state.
That's why a lot of people got pissed.
