The reason is probably similar to why the C65 was cancelled before consumer production. They would have competed too closely with the 500, which the C65 was already positioned to do, and the IIGS did with the lower end Mac.
I think everyone knew these machines were dead ends so having them cannibalize sales of the 16/32 bit machines would have been shortsighted and really wasted development time.
Think, if Commodore didnt 'waste' time, money and talent on the C65 and instead put that effort into Amiga how much better the 500/2000 might have been.
I think Commodore also probably felt that with 64 Emulator 2 for the Amiga, 8bit Commodore folks had an upgrade path in the 500.
Why they chose the chip they chose for the C65 development instead of that one is probably the usual, Commodore would rather use their own chip instead of someone elses.