what reason could he have given that would have been accepted? It basically boiled down to "we didn't want to do gnolls as a playable race" which is evident.
I guess there are two possible reasons - at least, two possible reasons that are easily intuited as making sense from WotC's point of view.
The first is "We don't think that publishing playable gnolls makes sense commercially". To me that seems an improbable reasons, but maybe they have data from surveys, DDI, etc that shows that gnolls are at the bottom of the pile as far as market demand for a playable version is concerned. (Do more people really want to play kobolds than gnolls? Seems strange to me, but then there's no accounting for taste!)
The second is "We don't think publishing more than X playable races makes sense commercially, and when we chose X from our vast pool of many more than X possibilities, we didn't choose gnolls because of [insert aesthetic reasons, results of coin tosses, etc here]." I think what we have been told is, in effect, this second. And I think people are disagreeing with the aesthetic reason that has been given.
I also think that people seem to be taking offense to the reason given...so that's a bit bizarre to me. As if the decision offends their sensibilities....it's odd.
Taking offence is silly, agreed. I think that feeling an offence to one's sensibilities is less silly, because the reason given has an aesthetic dimension, and aesthetic responses implicate sensibility.
That said, it would seem a pretty straightforward matter to adapt 3E or 4e gnolls to 5e, and I would be surprised if many of those who are feeling upset by this decision don't have access to one or the other of those earlier iterations.
As written in the Monster Manual, gnolls are a bit of a stretch as a playable race, with the demonic origin & nomadic destroyer thing going on.
There's always been this weird thing where CE is listed as a playable alignment and yet typically CE critters are often seen as not playable in virtue of that. (With drow as something of a long-standing exception.)
I don't really get it. And personally I don't really feel this strong contrast between gnolls and orcs, especially as orcs have been presented since 3E changed them from LE to CE.
But I agree that making up one's own gnoll wouldn't seem to be that much of a challenge.