I think you've hit the biggest factors here. There is an increased ability to make it past the Sweet 16 at a midmajor nowadays, with the one-and-dones and general demographic boom leading to more talent out there looking for colleges at which to play. But when you combine that with some trickle down of the oodles of money coming into NCAA basketball, you've now got plenty of guys at non-BCS schools making over a million dollars a year. Shaka could eventually ask for more at VCU if he continues with this level of success, hang around for 20 years and retire having collected $30+ million while playing with lower than BCS expectations on a campus where he's the king and would likely never be fired. The basketball programs at Butler, VCU, Davidson and others are the only ones generating any profit for the athletic departments, so they're plenty willing to at least be somewhat competitive in coach salary.
Yes, $1.25M is only half of $2.5M. But with the pressure to succeed immediately, and be a perennial contender in a conference with 6 programs in better condition than Illinois' right now, and the difficulty in going back to safer confines after cashing in for a couple years in the big leagues and 80% chance you can't satisfy the Illini faithful (Shaka need look no further than to his former boss for an example)? I can see the 2x factor not mattering all that much - $1,250,000 per year to coach college basketball is a boatload of money.