It really makes sense from a negotiation standpoint. It's generally expected that immigration reform will be a banner issue for Obama this term, and this bill was likely an attempt by the Republicans to get out ahead of the issue before more sweeping legislation is introduced.

By refusing to cooperate on this bill, it signals that the White House and the Senate are unwilling to let the Republicans pick and choose on reform, meaning that the issue is going to be addressed in the more comprehensive manner that the Democrats feel is necessary.