This isn't all Wenger's fault.
You're an old man, past retirement age but you've lived like a monk and you still have the energy to work. You've had the same job and lived in the same place for two decades so you probably don't want to move.
You're not doing particularly well at your current job but you still love it. You work in an industry where job security is nonexistent and your peers last two years if they're lucky. Then your employer sticks an 8 million pound contract in front of you and begs you to sign it. Just one more Arsene, go on.
What do you do? Retire too soon but appear noble? Take a safe but shit job like West Ham? What if it's not available - Southampton? Schalke? Or carry on with the same old, getting paid, managing a top team, being in the CL?
If he still has the energy to be a football manager, he'll be Arsenal's manager if he's allowed to be. He won't not sign a contract because of the fans or his reputation. It's the perfect job and nobody walks out on the perfect job for some kind of perceived greater good. I really doubt Wenger sits up at night saying "man that Allegri is such a better coach than I am. Arsenal would be so much better off if I resigned and he came in". This is the man that shipped 8 goals in a game and made Ashley Young look like Cristiano fucking Ronaldo. Everyone will soon forget that we lost 5-1 away to Bayern and even if Wenger does consider his future it won't be this game that did it. It's not like we've not lost 5-1 to Bayern before.
The decision about him staying shouldn't be in his hands. You can't blame him for not resigning. If I was him I'd retire and live the easy life, but if he feels there's still life in him and he's not retiring he's got no reason to walk away. The same way you wouldn't expect Flamini or Denilson to take half the pay to go to a weaker club that's more their level when they're still fit enough to play, but you'd 100% expect the club or coach to see Flamini and Denilson have no business being near our first team so we need to keep them away, even if it means a financial hit.