Why would New Jersey do that?

Devils just lost Marino and Graves, they need Severson. If Severson is moved, 1. Their D is healthy, 2. They are continuing to trend out of the playoffs at the TDL, 3. The trade involves a 23 1st and a prospect

Why would the Leafs give up the less expensive better Dman and give up picks too?

Because some Leafs fans still insist on hating him despite the fact that he's been playing as a first line defenseman on one of if not the best team since Nov 1st. Holl has played on the top line nearly all of that time only being placed on the second line for a total of 5 games. I said if Holl could play Norris level hockey and fans would still hate him and want him off the team. He just might prove me right. I don't know if I would go so far as to say he's Norris trophy level but he can't be as bad as people say when he's the top right D on one of the best performing teams in the league.
since nov the leafs have gone 18-3-4 three wins and two of those OT losses were with Reilly Benn on the top line meaning the leafs are 15-3-2 with Holl on the top line paired with Brodie or Gio.

Less expensive? Sure.

Come playoff time when the leafs are healthy, Holl is 3rd pairing d-man with most d-zone faceoffs. He maybe 2nd if for some reason Liljegren isn't improving like he has most of the season. Liljegren is 4th in the league for d-men at +17. He has matured greatly this year and is a mainstay on RD.

2nd + 3rd is not enough value to downgrade from Severson to Holl.
Severson is playing brilliantly, heavily tilting the ice in the Devils favor while paired with frickin Brendan Smith.
I doubt Holl would be able to sniff that level of success in such a role.