Why did Vitalik created Ethereum and not upgrade Bitcoin blockchain?

You can't unilaterally upgrade bitcoin?

what purpose would there be in making it a fork of bitcoin?

Ethereum uses an addresses system, which is kinda needed for the smart contract system, while bitcoin uses an unspent outputs system.

Also, the proof of work system is rather different, and the block times are shorter.

To make it a fork of bitcoin instead of having its own genesis block and all, would require a bunch of extra work without providing much benefit.

Why would it be a change to bitcoin?

Bytether is doing what you want https://www.bytether.com/

With all the infighting over block size I doubt such a huge change would have ever made it.

The only and right option was to create ethereum.