Ito was likely in for several reasons. Ren is playing a multi-layered political game that requires careful balance.
Mist looks bad if none of their own people are in their own tournament. It would make Mist look weak. So Ito gets included.
Ren wants an alliance with Leaf, but there are a significant number of internal issues with that. She has to make things harder for us so she appears anti-traitor, but she needs Leaf to win the tournament. Ito is clearly rather anti-Leaf, and publicly made statements to that effect, then lost badly after his Leaf opponent offered him a mutually beneficial long term deal (as the Nara are wont to do) and rejecting it.
The carefully crafted message is that Mist is strong (they're in the tournament), but not as strong as it should be (only one entry). That Leaf is significantly stronger than Mist right now (majority of contestants are Leaf, and Mist's entry lost to Leaf), that Leaf is willing to make a mutually beneficial deal, and that rejecting that deal will lead to a humiliating defeat. Except next time it will be for real, and that defeat means Mist dies.