if consumers don't really care about digital versus FM - why does the government?
You've misunderstood the situation. The state isn't just "dictating" the terms. The national broadcasting network is owned by the state [indirectly], which means they also have a say in the cost of maintaining and developing it. The national broadcaster (TV/radio), and its many stations, is the biggest user of the network.
The 1700 stations currently in use are due for a massive upgrade. The new DAB network will offer better coverage across the whole country, which is an important goal for the state (rural settlement policy and public information access).
Have the Norwegians solved every more important issue facing their people?
Yes, most of our problems are about spending the tons of money we have.