At what valuation were these VC's putting $40M into Digg? If it was around $100M, then they would only have 40% of the company and 40% of an $80M buyout is $32M. And I can surely see why they wouldn't want to do that.
Digg had raised a little over $10M at the time of the acquisition offer - which would have been a decent return. The $30M round was raised in lieu of the acquisition.
They placated Kevin by partly cashing him out as part of the $30M round.
With that additional investment, the de facto decision by the board and management was that Digg is a billion dollar business, not a hundred-million dollar business.
If you want your founder to swing for a long ball, you have to free him to do so. A partial payout means his utility curve looks a lot more like yours, which is a good thing.