Certainly I'd prefer to win $100 million rather than $10 million, but what many people forget is that your odds of winning matter also! For myself, I play Hot Lotto (assuming the jackpot is built up to a "reasonable" level, say $4 million) rather than PowerBall, even though both are available to me locally. $4 million spread over 25 years will take care of my needs nicely, and my odds are much better of winning the Hot Lotto payoff! Something like 15 times better, the exact number escapes me now. Of course only playing when the HL jackpot is $4 million or greater limits the amount of time I can spend playing! But I've been known to buy a ticket now and then anyway if it is lower than my target.
But I must admit that from everything I've read many more people subscribe to your theory of going after the biggest prize, rather than figuring out what they really "want" (nobody NEEDS to win the lottery!) and following the strategy that gives the best chance of meeting those needs.
There's also the obvious point that most people are willing to spend only a certain amount on lottery tickets, and if PowerBall draws some of it away from the state lottery, state receipts will suffer accordingly.