You are quite right Ian, it would make more sense economically and construction wise to do that but and it's a big but, the building is listed.
I think it was Blongb who expressed the situation with these listed buildings very clearly and there must be problems with others too.
Mostyn Estates had a problem with the building that was Barton's in St George's Place and it cost the Estate a lot of money to rectify.
I think they have been aware of the problem with the Castle Hotel for years and just allowed the building to deteriorate knowing that it may have to be partially demolished but I wouldn't be surprised if the public have been drip fed on information and that it was the Estate's intention to demolish the complete building from the outset.
After all it is a detached building unlike Bartons which was a terrace and the Estate had no choice in the matter. Perhaps in the future the CCBC should be more vigilant with empty neglected properties owned by the Estate.