Because the people currently fighting over there expect there to be a military presence for a long time to come (peaceful or war-ready). Even if things settle down in Iraq I could see their remaining 6-8 fully operational military bases. We still have military bases in Germany after how many years. Do people really think after invading a country we're just going to pull everything out? Look at our base on Kuwait, they are continuously adding more permanent buildings to it all the time. When we "help a country out" we establish a base of operations there with no intensions of moving.
As to why the embassy is going to be so large? Got me?
Oh, and I just noticed, that article is from more than a year ago. Like it says, the people working at the embassy need a place to live within safe grounds. So at least half of that project is housing. The reason why it is so expensive, is because having a contractor from the U.S. or any developed country work on building in a war-zone is at least $150K a year for just his salary, I don't even want to know what the contracting company makes for physically putting a person in that location; don't forget about housing them, feeding them, and paying Indians and Sri Lankans to keep the shower trailers clean, and serve food at the chow-halls (don't worry, they don't make that much money to be in a war-zone). I'm not defending the construction of a large embassy, just saying that's the way it is.