The way I see it, there are two possibilities for what is driving this double-down on the manager
1. The extension came from ownership, regardless of Falvey's feelings on the matter. They want costs controlled as the sales process drags on, and they don't see a path to a meaningful increase to short-term revenues with a manager change. Falvey is now tasked with putting verbal lipstick on this pig, which may have become his primary job if the cost-control mandate has extended to player acquisition. So why doesn't he quit? These primary decision maker positions are hard to come by, and there's no guarantee he'd find another one. It would be like a player opting out of a contract after the worst season of their career. It just doesn't happen
2. Falvey initiated the extension himself. Ownership didn't demand it, but they're not demanding change either. Falvey knows that one of the most effective ways to buy some job security in pro sports (other than winning, but who has time for that?) is to offer up the person beneath you as the sacrificial lamb/scapegoat/actual-root-of-the-problem (whichever you prefer). While there's no pressure now, there may be in the future. By keeping Baldelli around, Falvey keeps a card in his back pocket to play if/when ownership attitude (or ownership itself) changes. And since no one wants a lame duck manager, here comes the extension. Is it cynical? Yes. Does it boost Falvey's job security from his point of view? Also yes.
In either scenario, Falvey is acting in self-interest according to ownership wishes. I find it very hard to believe that the Pohlads want Baldelli gone but Falvey is putting his career on the line for him by pushing back against them. In conclusion, this is ultimately an ownership directive, and this won't change until they do.
As for why this got announced now? I don't know. I guess it fits this organization's MO of saying the wrong thing at the wrong time all the time