Why was Falken cast out of NORAD?

I think he quit.

He left because they had differences of opinion and wanted to abuse what he created (He created the programs to find a way to win a war without actually fighting one). They changed his identity to where he would not be bothered since he was a pioneer and listed in many scientific journals. That is, until David and Jennifer find him.

MM

'At the war room they think they can win the war. That there can be acceptable losses.'

'So you gave up? Decided to play dead?'

'For security reasons they graciously arranged my death.'

It was for humanitarian reasons he fell out of favour with the program, probably prompted by the death of his son.

"I don't reckon I got no reason to kill nobody."

After his son died he lost all interest in this. He quit and to protect all they put him in the equivalent of the witness protection program.