The Developers
It's not a question of whether one particular language is better, or more "hip", than another; or whether Google could simply run-off and create it's own new language or repurpose someother language instead of Java.
It's the developers Google is after, since it's the developers that will create the value (apps) for their marketplace and give them the competitive advantage over other smartphones & platforms.
There are a ton of Java (and its variants like AS3) developers out there, and Google wanted to launch and gain traction in its new platform with as little friction as possible.
If Google had launched Android as a Golang SDK, do you really think the uptick in new developers coding for Android would have been that great?
Edit: Yep, AS3 isn't Java.