The one reason a lot of teams are reluctant to drop (even when they totally should) is because dropping down a division allows families to change teams without prejudice if they so desire. It basically voids the letter of intent they signed with the team, and allows them to switch. When a team drops, and mom and dad think their little Gretzky is too good for the lower division, they typically leave the team and join up somewhere else.
On the flipside, few teams want to move up either, because they'd rather sandbag in a lower division, than be a mid-table or lower table team in a division up.