SIMPLE: Because Real play 4-3-3, wide forwards or CMs for attacking midfielders/playmakers available.
Isco is the very definition of AM, little slower central attacking playmaker with brilliant technique (dude just floats by players, seen him live, and its sick how impressive he looks up close), dribbling and good vision who attacks the channels, plays 1-2s easily and has keen eye for the final pass. He is bit too much of a non direct ball hog at times, doesnt realise it quickly, plus inconsistent at times, but can be ironed out with a persistent coach. But he is pretty much as creative central AM/playmaker in the hole as a player can get these days, in a time where these players get pushed to wide positions or lower CM position, as he has been in Reals tactical set up.
Elegant mofo, no way will Real get rid of him, and if they do, expect bidding war with EPL teams.