Because the EU should not be a collection of artificially bound yet unrelated policies.

And don't get me started on respecting the EU rules. Let's talk about that once Germany starts paying big fines to the EU for violating its rules on running trade surpluses, shall we?

I quite agree that Switzerland and other countries should start bypassing the EU though. Erasmus is, at least, not one of those things where the EU demands exclusivity.

But demands free movement of people.

Actually, the EU is happy to negotiate treaties with countries outside the EU. Conditions usually include free movement of people. If the country negotiating does not agree with these terms, the treaty is void. It can try to negatiate a special treaty, but the EU is not usually inclined to do that, for multiple reasons, not least to avoid setting precedents, to avoid effort duplicity, etc

EDIT: I forgot the main reason, from my point of view. The EU has been built with the person, the human being, at its center, with the idea that we all have the same rights. And one important right is freedom of movement. A union were goods, money and services can freely move, but people are forbidden to do so is not worth the trouble.

Free movement of people is never a part of the EU's free trade deals (with non-geographically European countries). Where did you get that idea?

Look at CETA or TTIP.

Your treaty blueprint for a deal EU-Switzerland is a treaty with a non-European union, with roughly the same surface as the whole Europe, and in one case with a population close to EU's? Also, both areas have much higher GDP than Switzerland, and huge amount of natural resources.

Not sure what your point is, but anyway it seems that the EU has already made up his mind on this matter and requires free movement of people for Switzerland to get access to the economic area.