Yes I don't get it either. Why dedicate capacity to a market with lower margins and more competition when you could use it for a higher margin market where you're not chasing somebody else?
Intel cares about entering gpu market because gpu's are eating away at intel's high end markets. Servers/HPC are never going to be 100% gpu but nowadays they incorporate gpu whenever possible. So instead of buying 100 cpu's, company can buy 70 cpu's and 20 gpu's and get better performance for less money than 100 cpu's.
As gpu's get more general, it allows them to eat away at work that was previously done by cpu.
On a different note, people are talking about intel drivers. With Larrabee, if intel has their way then there will be no drivers. Games will return to being run in software mode, game engines will be coded to metal instead of some bytecode api which is interpreted by drivers. Many game developers want this (tim sweeney of unreal fame and gabe newell of valve have said as much) because writing to drivers places a restriction on what game developers can do because there will always be a overall pipeline and overall logic that has to be followed, no matter how general each step of the pipeline can get.
So the point of any Larrabee drivers are only for sake of backwards compatibility so that people can play library of games they have and not just the 1 or 2 games that would launch with Larrabee.
Taking all that into consideration, intel's best chance for Larrabee success is getting a console design win from msft/sony/nintendo because developers are forced to start from scratch anyway. The problem is intel doesn't want to license out their architecture which may be a non-starter for the console companies since they can't control design iterations.
On the other hand the console companies might make the sacrifice of letting intel control Larrabee because having a true gp-gpu would greatly extend the lifetime of a console because of the variety of game engines that would be possible.
Or intel might have changed their minds about licensing out their architecture since xbox 1 (intel had control of cpu and wouldn't allow msft to make it on their own), because since then intel has allowed other fabs to make atom cpu's.
And the reason gaming or a console design win benefits intel's high end markets is because that would greatly accelerate the entire Larrabee ecosystem. There would be more people who know how to use Larrabee, more library's and tools, etc. Designing server apps is totally different from games, but having general knowledge about Larrabee out in the wild is far better than having nothing at all. (For grossly simplified example, a game developer might come up with some clever trick to boost performance and although HPC developer won't use the exact same trick, it will give him an idea of how to do something similar in his app)