It's very simple. In the past Rondo had the elite speed and could finish around the rim enough to keep defenses honest. Even when teams played off him sometimes he could still get by his man. He can't do that anymore and his FT% getting worse doesn't help his confidence in getting fouled.
Secondly, the league is moving towards shooting and spacing and Rondo doesn't fit into that type of game. It's possible that a team could get by with a team specifically geared for Rondo, but how good would that team be ultimately, and how hard would it be to get those exact players around him? With so many PGs out there now, who would invest so significantly in Rondo besides a bad, go nowhere team?
He just doesn't do enough anymore. Passing cannot be the only skill you're bringing to the table. If he can't shoot and he is no longer athletic enough to drive, or young enough to play uptempo 35 mpg, Even if you say Rondo is a great defender, that's not enough and certainly not worth 12 million/year.
That being said, I don't think Rondo is to blame for all of Dallas' problems. Their bench was decimated in the deal and Nowitzki is old. However, Rondo hasn't exactly been helping them overcome those losses which is what you'd hope a star PG would do.