The state should make an offer to buy the IAIS. You get a state-owned ROW that could be used for Quad Cities and far beyond. You'd be well on the way to a dedicated line between CHI and Peoria, which could be utilized in the future as the route for CHI-STL HSR. Get Iowa to invest in the Davenport to Omaha portion (yes, I'm delusional).
CHI-STL HSR routed through the Illinois Valley and Peoria, rather than Normal, is 50-60 miles longer, but I don't see UP ever giving up control of the line Lincoln Service trains currently run on, and CN would be even less cooperative for an HSR route to STL via Kankakee and Champaign. Plus, 220mph HSR, running an average speed of 165mph, would blow through those 50-60 miles in 20-25 minutes. Not a deal breaker.
I wholeheartedly agree that the IAIS should be in State hands. There should be service along the Illinois Valley from Chicago to Peoria. I can even see all-IAIS service to the Quad Cities, with half the Illinois Valley trains to Peoria and half to the Quad Cities. (Peoria Rockets and Quad Cities Rockets, maybe.) But I don't see the tracks along the Illinois River, laid out in the mid-1800s to compete with the I&M Canal, being the basis for a higher-speed mainline, much less HSR service. Too meandering compared to the alternatives.When a study was done in 2013 exploring the feasibility of a CHI-STL HSR service, a routing via Champaign and Decatur was used. That routing had trains going Chicago-Kankakee-Champaign-Decatur-Springfield-Litchfield-Edwardsville-East STL-STL. The portion of the route between Springfield and STL could be used in a route via Peoria.
While I agree it's unlikely UP will sell the present Lincoln Service line to the state, it's also unlikely the state will give up on service to Bloomington-Normal. Once you're serving Normal, it makes little sense not to continue along the direct, straight, and fast UP tracks to at least Springfield. We should have Chicago-Champaign-Decatur-Springfield service, but in addition to rather than instead of Chicago-Joliet-Normal-Springfield.
Similarly, I don't see an all-IAIS route as a replacement for the present plan to use the broad, straight, and fast BNSF line as the primary route from Chicago to the Quad Cities and beyond.
And while Illinois Valley service should go to Peoria, I imagine the fastest service Chicago-Peoria would be via Normal. Maps show the tracks Normal-Peoria still there. They could run either Peoria shuttles meeting every Lincoln Service train as Roomette11 suggested, or (my preference) direct Chicago-Peoria trains. With more frequent Lincoln Service trains, travelers to/from from south of Normal could still transfer at Normal. Direct service could be called Prairie Service; I don't imagine Prairie Marksman would get too far as a 21st Century train name.