Oh they need the fighters, so probably either went with the cheapest deal -or- the Europeans bribed better! Corruption is rampant in India, in all government agencies. Another reason to not wish for a big government. Private sector tends to have much less corruption due to competition. Government has no competitor to worry about.
When the younger generation takes over, the alliance with US is much more likely to take place.
Umm, the European aircraft are more expensive than the American offerings, so your first theory is out.
About the second, well if corruption is so rampant in India, how did Lockheed, Boeing and GE win so many deals since 2005?? Applying your logic, that would most certainly have had to involve some corruption since the net worth of those deals is almost 8-10 billion USD. About this particular contract, if there was any proof of bribery, do you think the other competitors would have stood idly? It is not like they are not allowed to object or appeal. Do you think the media and opposition parties in India would waste an issue to flog the government with??
Sometimes accepting that an air force made a technical decision to opt for newer systems makes more sense.
http://www.sldinfo.com/?p=18921