Princeton's location may have a lot to do with its historical lack of a law school. Legal education used to be built around the apprenticeship model, and you need practicing lawyers to have apprenticeship programs. While Boston/Cambridge and New Haven were thriving industrial centers in the late 19th century and thus generated a lot of legal work and attracted lawyers who could start apprenticeship programs and eventually law schools like "the new haven law school" (http://www.yale.edu/bulletin/html/law/study.html)--Princeton's rural location may have meant that there were few lawyers in the area taking in apprentices. Moreover, Princeton is close enough to New York that Columbia and NYU probably filled most of the need for legal education in northern New Jersey.
Here's where I definitely disagree... Princeton is a) hardly rural and b) not truly northern NJ. I live in Bordentown, 3 towns over from princeton, right on the river across from pennsy. Not only does princeton have a fairly thriving private legal practice, it borders directly on Trenton, the administrative center of NJ. There are plenty of legal firms in the area, not to mention big business (tons of pharmaceuticals, a business lawyer's dream or nightmare, depending on who you ask) and, naturally, the ever so wonderful government.
Basically, it's a vicious circle. Princeton doesn't have the exact environment one would expect for a law school, but it would acquire it if one was there. But one probably won't be there without the necessary environment.
All I'm saying is they're definitely missing a bet.