I'm not theymos, but I'd like to think that it at least requires a good understanding of the rules, and the amount of reports or even quality of reports would be better than activity.
I'd think those would have to be the absolute minimum standards for consideration.
What I was thinking is that being a moderator is a paid position, right? Perhaps Theymos doesn't feel the need to spend the money to hire mods for local boards that might not get enough traffic to warrant one. I don't know if that's true or not, and my assumption is that the forum is not hurting for money but Theymos may not think it's a good use of funds. Plus if every local board had a moderator, those would be more members he'd have to evaluate and manage. That could turn out to be a gigantic pain in the ass for him.
Just thinking out loud, but those were the first things I thought of. It isn't like having mods in the local boards is a bad thing--it isn't, not at all. So there has to be a reason why Theymos hasn't hired them.