I think the #1 reason is that like they mention git is a second class citizen on Windows. If git was more integrated with windows they probably would have chosen it.
I like git, Mercurial, Bazaar but my favorite recently is Mercurial. Both Python and Google Code switching to Mercurial. The funny thing is Mercurial might win because of this. Google code played a huge role in SVN becoming so popular.
Both Mercurial and Bazaar are Python based. Git is C based and written really for *nix in mind only.
I was under the impression that competition was generally considered a good thing, especially when the products involved in this case are similar enough that it'd be easy to automate interoperation between them.
IMHO, the 2 products are too similar for the competition to be very advantageous.
The past has shown that all real future innovation in version control will come from new products, not established products... Five more years of Git vs. Hg is probably not going to help innovate version control systems.
I see git vs. hg as a KDE vs. GNOME type thing -- similar products, yes, but with different underlying philosophies and presenting the same ideas in usefully different ways.
Heck no. Check out the hgsubversion plugin for HG. It is getting pretty close to seamlessly hiding SVN as a parent of an HG clone. I've been using it for a few months on a large project (ca. 450k LOC, 8 years of history). You "hg clone svn+http://..." and then you can hg pull/push like normal. I haven't tried any major cross-branch merging -- I still do that in SVN at the moment -- but it works really well. I've got an HG SVN clone on my desktop at work, and a clone of that on my laptop.
I don't know about the HG/CVS possibilities, but I wouldn't be worried about DVCSes.
And, on an unrelated note, I'm really happy about Google's decision. I evaluated git a while ago, and I found it kludgy and awkward. A revision control system should stay out of my way and be a useful tool, not become a full-time job with an equivalent learning curve.
Now google has probably put the balance back to a tie between the two systems- Git probably was in the lead before this announcement.