If one can remember as far back as 2004, it made quite a bit of sense. AK was coming off a breakout season in 2003-04, where he was an all-star and had games where he was the best player at BOTH ends of the court that season - and was only 23 years old.
Yes, in retrospect it was a huge, huge mistake, but at the time, it made alot of sense because AK was easily the face of the Jazz franchise, was still extremely young and had VERY FEW injury problems up to that point (missed a total of 6 games in his first 3 seasons). Where the franchise was in '03-04 after losing Stockton and Malone, there was no way the Jazz could risk losing AK to another team and have him become a superstar elsewhere. Each year AK had improved his perimeter shooting, ability to attack off the dribble and it looked like he still had alot of improvement left in him. He started the 04-05 season playing lights out and was the early favorite to be DPOY before a freak knee injury in San Antonio. I remember multiple analysts at espn praising the extension and touting the ability of Utah's new frontline (AK, Boozer, Okur) to become one of the best in the league. AK's development into a franchise player obviously never came to fruition, but saying it "never made sense" is simply Monday morning quarterbacking when you can't even remember what happened on Sunday.