They could have bumped the Classic to 16mhz but they saw no reason to.
The Classic's design was largely driven by the desire to reduce cost. The Classic was based on the SE to save cost, just in cut down form using surface mount technology. They even removed an ADB port to reduce cost. Yes, one port, to reduce cost. They removed the brightness knob to reduce cost too. If they were skimping on things like a potentiometer and an ADB socket, there's no way they were going to spend extra money on a faster CPU, even if it was only an extra few dollars per machine (actually not sure what the difference would've been back then). The Classic power supply is of a significantly cheaper design than the one used in the SE, again they cheapened it in every way possible. There's no way they were going to give people anything more than they perceived they needed - remember, Apple knows best for everybody involved, same philosophy as today. So you never would've seen a 16mhz CPU in a machine like the Classic, especially with the $999 price tag.
The Classic was *originally* going to be a $2000 machine until they changed course and decided it would be a budget oriented product. They were obviously onto something - the Classic was massively successful, selling in very high numbers to home users and schools. And that's really my point, at $999, if someone wanted a cheap Mac at the time, to do the things a Mac was known for doing (paint, draw, write), the Classic did all those things just fine. It wouldn't have been a $999 machine with a 16mhz CPU, not with the margins Apple want to maintain. We tend to look back and nostalgia / retrospection clouds our view of things - yep, the Classic wasn't a fast machine even in 1990, but it was never meant to be. It was meant to be a cheap machine to help Apple gain market share in key markets like education and the home at a time when they were getting annihalted by cheap PC clones, and that's what it did.