Dan,
Philadelphia was under consideration at that time as host to a men's Amateur. It was the only well-established district in the country that did not hold a men's Amateur. Merion was considered because it had a lot of influential members, it was considered a fine course in its day and it was the only private club in the country with two courses. Both courses were considered suitable at the time for holding the event.
However, it is clear that the East Course evolved quite dramatically between 1912 and 1916 and even more so between 1916 and 1924. In addition, there were significant alterations made before the 1930 Amateur and also before the 1934 Open. While Merion East was a vast improvement in golf course design of that era, the finishing holes and the quarry holes were already highly regarded. I think it was, from the beginning, a difficult test of golf. Yet it took some years before it began to look and play in a way that would be familiar to us today. It was another 10 years or so before it went from a very good golf course (rare in that day) to one of the world's best. It would be another 10 years before the golf course was essentially in the design iteration we know today. The 22 or so years of redesign and tweaking were essential to the greatness of the finished product. In the best sense, these were improvements.