Precedent, precedent, precedent. Apparently because the idea that thieves and governments can point a gun and take whatever they want has been around for centuries makes it right:

You have to accept that government can take property. The power of eminent domain is ancient. What the Constitution requires that “just compensation” be paid to the owners and that the taking be for a “public use.” This case was about what counted as a “public use.”

Slavery is ancient. Human sacrifice is ancient. The idea that women should not have the vote is ancient. None of these practices is considered acceptable today in the United States.
The Constitution is a great document. It was a great step forward in the development of human societies. And, in the context of the Constitution and subsequent jurisprudence Kelo should not surprise anyone. That does not make Kelo just or consistent with the rule of law. Thank goodness that Kelo has generated outrage. There is some hope that we can look toward an even better Constituion in the future. One that clearly focuses on serving and protecting the individuals it should be meant to serve.
In one of the comments to her post Althouse asks:

All you conservatives: why aren’t you interested in federalism today?

and here argues:

If you generally support federalism, that means you like the idea of freeing state and local government to set their own policies in response to local ideas about how things ought to be done. You like decentralized decisionmaking.

I doubt I’d be considered a conservative so my answer may not count. What is broken here is that this is all about government. Where are our rights as individual human beings? Did we establish our governments to legitimize gangs of thieves or to protect the rights of individual human beings? I know which answer I prefer.
Furthermore, decentralized decision making is great but not when it is only governments who can make the decisions and not when a government entity can breach the rights of the very people it is meant to serve. Decentralized use of local knowledge leads to great results when individuals and freely formed associations of individuals exchange goods and services with others free of force and fraud.