IMO, Indiana basketball has become irrelevant because the administration wants it to be irrelevant. After RMK, the powers that be have chosen to never put the university in the position of being a basketball program with a university. RMK and the program in the '70s and '80s was just that... and some argue that Knight's success allowed his boorish behavior to rule the day. When John Ryan left IU, so did any aspiration for a successful blue blood basketball program.
The ADs since that time have also been content with making money and being "decent". Clearly they have the ability to focus on the program, and simply have chosen not to, again, IMO.