The real reason (since the third rail would have been replaced and much of the area that would have been used on the Lower Level used is still used as the LIRR ticketing/waiting area) is that the shallow option required underpinning of the entire stretch of MNRR tunnel above and several buildings.
The easement costs would have been ginormous, since you do not have to actually have drawings in hand to claim that you planned on rebuilding on the lot with a skyscraper and the tunnels would preclude the proper basement/foundation levels.
As for the depth. There are deeper subway stations. In other parts of the world, high speed escalators are quite common. But in NY....