I imagine they (the movie people) are concerned that you can't mix a "tech" movie with a "magic" movie and make it believable. I can kinda see their point, but geez, you could make the Mandarin a tech villian. Just have his rings control satellites that rain fire, broadcast holograms and that kinda jazz. Not too hard, guys!
Maybe they're concerned about making a villain who is Chinese, since that's a major market now.