What was the intended benefit of truncating the Target?
I suspect that the target is truncated so it will not consume too much space in the blockchain.  

The blockchain stores a compact form of the target in a "bits" field that is 4 bytes wide.  This is (significantly) less than 32 bytes (256 bits) representing a SHA256 hash.

For context:


The space savings is exactly 28 bytes per block.
As of 2/28/13, a block count of 223693, that's 6,263,404 bytes or roughly 6MB that was saved with this optimization.  This data optimization applies to data-on-disk, and what is sent to miners from pool operators