Twisted is quite large nowadays http://twistedmatrix.com/trac/browser/trunk/twisted
Compare it to Tornado source, which is ~30 Python files https://github.com/facebook/tornado/tree/master/tornado
Tornado is the bare-bones essentials for an async web application server. Twisted is not. You can start with Tornado, then put Django or Twisted on top, but that's optional.
Besides, people are kind of scared of Twisted.
It would also have made porting tornado to python 3 a huge effort (given twisted code size).
I tend to agree with Brett Taylor in that Twisted was too large a project to suit the goals of Tornado, and that its own divisions within twisted.web were difficult to navigate through
the event handling part of Tornado is less than 100 lines of code and is a lot easier to implement and understand than Twisted, although Twisted also serves a purpose. I like and prefer that Tornado is self-contained and focuses on a single use case (returning JSON in long-polls) and does it well
not using Twisted was the whole point of Tornado, wasn't it? If Tornado used Twisted it wouldn't exist.
As was mentioned already, competition is good.
I have used this in a few applications and really liked it.
They've historically kept up with new Tornado releases, so hopefully they'll catch up with Tornado 2.0
(Some of these things might have been fixed, I haven't checked)
Also, as always, since somebody said "Twisted is big," I'd just like to counter: Django is twice as big as Twisted and nobody seems to mind.