Hi Matthew,
based on the response I got it basically had to do with being late to the game (apparently there were a lot more organizational applications this year and being late on it did not help us).
I actually ended up getting feedback from one of the main organizers of the program about our application. She encouraged us to apply a few days early next year (sounds like we are the kind of organization they are looking to support).
After getting this info I spammed her and the GSoC team more than a few times begging. It didn't help us get in, but it did result in the following suggestion for promising .LRN student projects in 2007:
1. Have the students apply and pick Google as the mentoring organization.
2. Reference a .LRN advisor with the application.
3. Remind the group about their suggestion (I am happy to resend)
The student applications deadline has been extended to:
Tuesday, March 27, 2007, 12:00 AM UTC
Carl