I think it was in a Kotaku article where Tabata said they had to cut the invasion because it would have added a year of development, and they were on a stupidly unrealistic timeline to begin with. Ironically, now that they're supporting it 2 years after launch and the engine is complete, it *could* be added. But that would mean ret-conning all of a feature-length movie and the beginning of the game.
Thats not the source i'm talking about though, which the subject was actually centered on why a playable invasion wasn't gonna happen with current FFXV prior to release.
"Schreier: At this point it’s become clear that the E3 2013 trailer, where FFXV was first revealed, that was CGI—that was more of an idea than an actual product. But a lot of people are wondering—because it came out that the Niflheim invasion, you won’t actually see it now, just hear about it—people are wondering why you decided to make that change?
Tabata: When we first sat down to re-plan the project that’s Final Fantasy XV, we really looked at which elements we need and should use and could do to create that kind of unique gameplay experience that we wouldn’t really get anywhere else. It was a very in-depth discussion about what elements to keep and what to throw away or change. We felt because the theme we’re trying to handle here with the story is such a massive epic tale, we really couldn’t fit all of that into the game that we had the time to make. So we wanted to show the essential things to get the best story across, which is where we decided on that—that’s reflected in the final form of the game.
It’s not that we don’t need to show the Niflheim invasion to get the story across, but because that episode is something that would take up so much effort and time that rather than force it into the game, we started up its own separate project independently, and that’s the tale we wanted to tell with the film. That’s why we moved that to Kingsglaive. From a story perspective we’d have to have both the game and the film, both of these together in one package, but realistically that’s not something we could have done in one game, it’s too much.
It’s very similar to the kind of decision we had to ask ourselves, OK do we spend another six years to develop that whole complete package as one game or do we spend three years to do it in the way that we’re doing now? I think, it really doesn’t affect it which one you get to see—from a story perspective whether you see it as part of the game or through the film, and how we tell that story is not such a thing which is affected by that choice. We really are confident that we’ve made a really great experience with that. We felt the most important thing we needed to depict through the game was that idea of traveling together with these comrades and watching them all grow and develop as people emotionally at the same time. We really have gotten that in there, so from a story perspective I think we’ve done the best we can."
So, basically, it came down to time issues. They couldn't fit the creation of the opening Insomnia event without lengthening development even more than it already had been. Which was unacceptable for Tabata, the team, and SQEX! They needed to get the story into a single game, which was impossible, so they did the best they could and saved the Insomnia invasion using Kingsglaive.
And before everyone starts throwing muck about, the DLC episode stuff wasn't decided upon until almost at release, and wouldn't have either had this much quality or been lengthened into 2018 without fan support of FFXV as it is now.