I believe the initial consensus was that a Python-based version control system was greatly preferred over anything else, and that for Git to be considered someone would have to show that it's much more compelling than the other systems. Git was allowed into the PEP later on, however.

Besides being able to say they're eating their own dog food, I think having the ability to easily extend their version control system was a factor in the choice. The Python developers would just be writing Python, after all, and Mercurial has a very simple extension system.

I believe Guido has had direct communication with some of the core developers of Mercurial as well, which was probably another factor. I'm not sure what Brett's DVCS usage survey had to say about Mercurial or Git, but that could also play a role in his decision.

Here's the original thread that led up to the PEP: http://thread.gmane.org/gmane.comp.python.devel/98191. From what I understand, there wasn't supposed to be a lot of discussion until the PEP was written, but people couldn't help but voice their opinions on the matter. I'm guessing this is why Guido put his foot down: to prevent an endless religious debate. Hopefully the PEP will be revised with a more detailed explanation of his rationale.