I never understood why Sheppard East (oops, correction made) was deemed TC line 1.
Because Miller & Co wanted it to be. They wanted to remove the debate around the extension of the Sheppard Subway. If the SELRT was in place, transit expansion could take place elsewhere without the continual "why don't we spend it on the Sheppard Subway instead?" debates.
Unfortunately, this desire to bury controversy (or not bury it, haha) doesn't match up with the actual transit priorities for the City.