Presumably, because if they increased their intelligence they would realize that the war is stupid and go home, which leaves fighting only those that did not. This starts to look like a rationalization, rather than serious reason, but then I always thought that Culture books are carefully constructed to retain as much as possible of "classic" science fiction (starships! lasers! aliens!) in the face of singularity.

This post seems to be missing one important thing about Culture universe (unless I missed it): in that universe "high-grade transhumanism", if I understand the term correctly, is possible, and, if anything, common. The Culture is an aberration, one of very few civilization in that universe which is capable of Sublimation, and yet remains in its human form. The only reason for that must be very strong cultural reasons, which are constantly reinforced, because all those who do not agree with them sublimate into incomprehensibility before they can can significantly influence anything.