According to the Daesh there are two sides. Muslims who pledge alliance to Islam and non-Muslims. That even goes as far as counting Al-Qaeda as non-Muslim because there members don't pledge alliance to the caliph.
To the extend that Daesh succeeds in convincing Salafi Muslims that they have a valid caliph those Muslims have a duty to join Daesh.
Western leaders don't want that Daesh succeeds in that propaganda goal. As such they don't like to say "Islamic state" which indicates that all Muslims belong to it as Daesh says but rather prefer names that speak the group as being defined by the region in which it's operating.
It's a bit like the discussion of whether to call the inherentance tax death tax. On the margin calling it inherentance tax supports the instiution while calling it death tax weakens the organisation.
Calling Daesh "Islamic state" strengthens it and that's we they call themselves that way.
Obama doesn't call North Korea the "Democratic People's Republic of Korea" which happens to be the name the state give itself. If he would do so, people would complain because that would be friendly towards North Korea. Calling Daesh "Islamic state" is as friendly to it as calling North Korea "Democratic People's Republic of Korea".
more credible explanation?
Simply "bushism", I think.