From all I’ve read on this I have to conclude that this decision was purely political. The Tories no doubt based it on polling. It’s a massively popular move that appeals to nationalist and anti-American sentiment. That it’s a horrible idea should be obvious from the fact that Jack Layton and the NDP have praised it so enthusiastically.
In the long run it will end up just being hugely expensive for MDA shareholders and taxpayers and a hit against free enterprise and property rights. All this for the national ego and no significant effect on sovereignty or national security.
More - The Torch, Corcoran, Public reaction
Update: Excellent posts here by Brian Dell and Luc Schulz.