Why isn't Touhou spelled Tōhō?
Because there's no one standard way to romanise Japanese writing. Personally I think the more little way of writing ou instead of ō is the best, and I guess whoever first introduced Touhou to its western fanbase was the same. And since most of those western fans don't speak Japanese, it presumably became the standard way of writing that particular name, since they don't know any other.
I have seen Japanese people romanise it as Tōhō as well, and it's not like that's wrong or anything. I've also seen Toho, but that definitely is wrong.