I can't figure out why a Bernardini - Dreamtheimpossible by Giants Causaway - Spain yearling (hip 0596 at the Keeneland sale), wouldn't at least meet the reserve ($70k), as just the stud fee is $100k.

Most likely there was an xray or throat issue that would either preclude racing or else require surgery and extensive rehab. Unfortunately, paying a high stud fee doesn't guarantee that you end up with what you hoped for in the resulting yearling.

Wouldn't such a yearling with that pedigree make at least an attractive regional sire, even if unraced?

I can't imagine that horse would be attractive (especially unraced) at all. Bernardini has plenty of sons with nice pedigrees, who can run. And, I don't know how attractive the female family is for a stallion family.... Spain's son Plan has 12 foals, 1 runner in his first crop.