In short?

Because it was designed as a war of defense and it was justified as such. I go into ridiculous depth in this post about the particulars but the short of it is that Bavaria and the other Southern Germanic States ("Little Germany") did not very much want to be friends with Prussia. After the Seven Weeks War the Prussians would actually let the Austrians off almost scott free. This was intended to throw the Great Powers, notably Russia and France, off her scent. Her goal wasn't in Austria, it was in the parts of Germany that Austria had under her sphere -- Little Germany. She brutalized the Bavarians et. al in peace negotiations and then when they offered slightly better terms they groveled for it with every bit of sincerity.

So we go into 1870 and it's been less than 5 years since the Seven Weeks War. Bavaria et. al are in a defensive-offensive alliance with what is now the North German Confederation which may as well be named "Greater Prussia". In this time, especially in Bavaria but in Hesse-Darmsdadt and Wurttemburg too, anti-Prussian sentiment was growing rather than subsiding.

In a strange way the war was more a North-South German affair more than anything else. They did not want to be absorbed into a greater German state (see the above linked post for more explanation there) but the Prussian strategy was not giving them any other options. Austria was defeated in war. Russia was backing off (Bismark threatened to incite 1848-esque revolutions there if they tried to intervene and Prussia even supported the 1863 Polish rebellion; they weren't bluffing), Britain didn't give a crap at the moment, and France was their only chance of future support. The only Great Power who remained that would contest their wishes. The war was designed to crush France in that regard so that Bavaria et. al would be militarily and economically isolated (Prussia dominated the German economy and held non-inclusion in the Customs Union over Bavaria's head as a threat) and be forced to accede.

However, even more important, was that it was a war of defense. Because, ultimately, they didn't want to completely browbeat them into submission -- there were noticeable pro-unification movements in these territories. They knew from the French incursion into Italy a decade or so prior that whenever the French attack any form of German, even the Austrians, massive nationalist sentiments spark. That was the goal of Bismark -- goad France into attacking Germany, make Germany the victim, crush them in glorious battle. Simultaneously isolate Bavaria and give such a rise of nationalist sentiment that the 50 year old call for a unified German state for protection against foreign invaders would be called for.

In this respect he didn't take any land from France that wasn't ethnically majority German. Now half of Alsace-Lorraine is ethnically majority France but that's basically why they've been fighting over it for so long :P