So UConn gave him an extension to finish 6-7 and play one of the worst bowl games of the 2015 bowl season but wouldn't have if he finished 6-6 and no bowl game? Please tell me that you understand that the bowl game and contract extension are two completely separate entities.
Diaco got his extension, and absurd buyout increase, because he brilliantly played and won a game of knifey/spoony with UConn - "I got UConn back to bowl game eligibility and now (X), (Y), (Z) schools have shown interest in hiring me". UConn, about to embark on a Big 12 expansion process that was 100000% about football, probably thought that replacing their football coach before a potentially huge football season with huge impact on many things, including becoming a P5 school, was too much to ask for a new coach. UConn was desperate to get out of the AAC and blinked. Diaco took advantage of the CR situation and won on all counts. Diaco has lied to just about everyone during his tenure...and that includes UConn leadership (and an AD who had a foot out of the door and pointed at Ann Arbor).
To be fair, I don't think anyone in their right mind saw this dumpster fire of a season coming after getting to a bowl game last year. Expectations were high - some, including me, thought that we could even contend to win our AAC division. We were all wrong. It doesn't justify the buyout increase though. UConn could've very well increased his salary a bit more and left the buyout as-is (or increase it modestly), but they chose to save a few bucks on the salary and try to cash in on (X), (Y), (Z) school to pay his buyout and make a little coin. UConn dug itself quite a financial grave here - one that they have no choice but to bite the bullet and pay or else they run the risk of losing more games, players and, most importantly, fans/money.
In a series of horrendous mismanagement mistakes made by UConn over the years, increasing Diaco's buyout ranks towards the top of the list. But that has absolutely nothing to do with playing in the friggin' St Pete Bowl or not.