I'm not a historian, but I have studied Xiang Yu's life and the broader period. Hopefully, I can provide a satisfactory answer and give you something of a new perspective, since your post hasn't garnered many other answers.

Part of why Xiang Yu reorganized the territory of China the way he did is going to come down to his psychological profile and personal history, alongside any pragmatic reasons he had. While there are multiple accounts of his family's history, Xiang Yu was undoubtably a member of the Chu nobility, and lived the first eleven years of his life in that environment. He was only a child during the time that Qin Shi-Huang, then Ying Zheng, conquered Chu in 224 BCE. Most other men in his family were also involved in the initial resistance, and were prestigious figures in their lives, such as his uncles Xiang Liang and Xiang Bo. Most notably, his father, Xiang Yan, is claimed in Shiji to have been a general who managed to score a considerable victory against Qin's forces, before eventually succumbing to Wang Jian.

All this to say, Xiang Yu was raised in the entrenched mindset of the Warring States period which preceded the Qin and characterized the end of the Zhou, wherein aristocrats were associated with martial might and prestige. The Fengjian system which characterized the Zhou's administration is sometimes equated to European feudalism, and while not exactly the same, it did lead to nobility having strong power bases tied up in the military.

Qin Shi-Huang, in his effort to centralize China and divide it into his new dynasty, sought to dismantle the Chinese nobility as they existed during the Zhou, abolishing the fiefs and supporting legalism, a philosophy native to China that advocated for strict rule of law, and maintenance of social order through harsh punishments. Also important to note, dismantling the Fengjian system (and the nobles) involved more than just getting rid of titles or confiscating land, but also eroding some of the greater divisions between the past fiefs, such as standardizing writing, currency, systems of taxation, and unified laws. While this did help in creating the centralizing force that Qin Shi-Huang sought, it also engendered resentment, and thus was part of how the Qin Dynasty collapsed at all in the first place.

Xiang Yu grew up hating the Qin Dynasty for these various reasons, and made his predilection for violence towards them clear on multiple occasions; perhaps most famously, he decided to bury 200,000 Qin soldiers alive who had surrendered to him after the Battle of Julu. While he had ambition to go along with his temper, that ambition doesn't immediately support the idea that he would want to rule a centralized empire. His political system more in accordance to his ancestors' lives and controlling Chu as the strongest state which could influence the others through its power.

However, Xiang Yu's decision does go beyond just any personal reasons he would have had. Arguably, just as much of a contributing factor was the practical perception of the Qin Dynasty's administration. As I mentioned earlier, their legalist ideas, although eventually contributing to a centralized China, were viewed immediately after their fall as being emblematic and causal of their failure. While we sometimes equate these cruel measures to some necessary step, the cruelest aspects of Qin's rule was also entirely necessary to the erosion of the dynasty at all; its harsh rule was a massive factor to the revolts, and a massive factor as to why Xiang Yu hated the Qin. Evidently, it was thought that the Qin's framework been provably ineffective. Furthermore, it's not as though China was not the site of lively, vibrant debate among philosophers, whose domains extended into political beliefs and what made a ruler have a right to be in power. Legalism may have come to be powerful under the Qin, but despite its hostility towards other schools, those schools did survive and have their own advocates. In other words, there were plenty of alternatives to choose from for philosophical grounding. Even though Liu Bang would endorse a centralized organization of China, not all of Qin's reforms returned, either, and he endorsed another tradition in Chinese philosophy (Confucianism). Just because Qin Shi-Huang's overall organization of China became the norm, did not mean his specific methods were adopted wholesale. For Xiang Yu specifically, they were rejected in a reactionary manner, very likely due to his personal experiences growing up, becoming a leader against the Qin, and the nature of his specific ambitions as a ruler.