The Iowa caucus is different from a typical primary poll. It takes time because there is campaigning there and everyone fills out their paper(blank sheet, not a ballot) secretly before handing it in. It's basically a more limited version of an actual primary because it requires more effort from voters and typically only gets the more devoted to vote.
Such a venue provided Paul with a great platform for a win. He has a strong following, money, and did well throughout the run-up to the caucuses. He'd never win states with higher volume of voters, but Iowa's somewhat limited system was his best shot. Most people won't vote for him and think he's crazy.
Iowa was his one shot to win but he was most likely hurt by revelations of past statements. He'll now most likely fade off into the sunset since it's his last house term after this one.
No one wants Romney. He's just the one with the most potential to win. He's the closest of the candidates to Obama in polls, but he's also a duplicate for John Kerry. He holds or held many positions that don't jive with the GOP base. He's only gotten support because he's the least crazy of them all. It's not because anyone likes him or thinks he is a great candidate. He's just the potentially most competitive.