There's a difference between not promoting someone from lead code monkey, and not promoting someone from head of industrial design at Apple. The latter is a valid landing point for the rest of your life.
The article notes that Ive is worth $128 million and has tremendous autonomy within the company. I.e. he gets compensated extremely well and has a ton of power but still gets to do the work he is obviously very good at. Why would he want to become CEO where he'd spend all his time answering to shareholders and analysts? Just to move up one step on the org chart?
Where you really get the promotion problem is when your corporate structure is too inflexible to give adequate compensation and authority to your best technical people. That does not seem to be a problem here.
You can never compensate a person what they would make if you actually promoted them. I.e., you can't pay your CEO less than or equal to your Chief Engineer. If I'm wrong on this feel free to speak up and/or down vote me.
I think you're making some assumptions here that are not necessarily correct, 1) that by being CEO you don't get to do the fun stuff, we only have to look at Apple's own former CEO to know that's not the case, and 2) that a person at this level is going to reflect on the choice and not think they would be good at the higher position. I'm no John Ive, but even my little ego has never allowed me to think I won't be equally good at some higher position than my current one.