I would guess that stntylr is correct on the politcs. Governor Doyle is on his way out, and the candidates have already laid out their positions on the project: Tom Barrett (D) for, Scott Walker and Mark Neumann (both R) against. Highway builders and other proponents of urban sprawl will be very interested in this race. The farther along the project is, the less of an issue this becomes in the governor's race.
I was surprised at how fast this went. It was only a few weeks ago that the Wisc. DOT announced that it was open to sites other than the airport. The Madison City Council immediately voiced its support for a site as close to downtown as possible. With the speed of the decision, there was no way First Street could be in the running, since the previous EIS didn't cover that site. I was also surprised to see that the Airport's ample parking was not considered a sure thing.
Wisc. DOT evaluation of sites (PDF)
As always, the devil is in the details, and the details are still pretty vague. The State has three office buildings on the bluff overlooking the tracks, on either side of Monona Terrace. How one of these buildings would be re-purposed is beyond me. Access from John Nolen Drive, the quickest approach from outlying areas, is also important. Other streets nearby are a tangle of one-ways. Parking as it stands now is scarce, but the city has been planning the replacement and expansion of a parking structure about a block away. The city's parking utility has for years favored short-term parking over all-day and overnight; whether they can change that business model is yet to be seen. On the other hand, the majority of city buses pass about two blocks away.
On the rail side, eventual extension to St. Paul will require a backup or a reversal, similar to the reversal the Keystones make at Philadelpia 30th Street. Current CHI-MKE trains run with controls at both ends, as will the Talgo sets that on order to replace them. The studies I've seen have always kept the Empire Builder on the CP main line through Columbus. WSOR has been pushing to close several grade crossings on Madison's east side for years; adding Amtrak will add to that pressure.