Well, C was written to help write an operating system (UNIX), where you are hitting the hardware and want to be able to do pretty much anything. It could be argued that if you are not writing an operating system you shouldn't be using C. I suspect the choice for Arduino was dictated largely by the need for a free, widely understood language/compiler, not because C is the most appropriate language for the job - teaching novices how to program a controller.
And now I'll duck. 