Ignore WAR if you want, but the reduction in WAR in recent seasons is due to a combination of declining value in every phase of the game. Alonso was coming off of the worst defensive and baserunning seasons of his career along with the worst expected statistics of his career. It's a neat story that he's producing the way he is right now but there was nothing to indicate this type of resurgence was coming. He was a picture perfect candidate for a pillow contract to prove that he was capable of a bounceback. It's completely hindsight criticism on your part to suggest it was somehow dumb for MLB front offices to be wary of handing out an expensive long term contract to a player that appeared to be firmly into his decline phase. This really has nothing to do with your claim of WAR not properly encapsulating value of offensive players and more of a case of a player who was showing signs of serious decline in his physical skills.
None of this is intended to attempt to take away from what Alonso has done so far. He's managed to improve his overall swing speed while shortening the length of the swing, reduce his whiff rate, drop his strikeout rate, and impact the baseball at Aaron Judge levels so far. It's a very impressive turnaround up to this point.