but why is the MIT licensed chosen, when that very license allows closed-source bitcoin-related software to be created, when this very action is against the pro-transparency philosophy?
Even if Bitcoin Core (also called Bitcoin or Bitcoin-Qt on older version) use AGPLv3 or other strict license, it won't prevent people from creating closed-source Bitcoin-related software. They can read documentation about Bitcoin protocol and networking, then create their implementation from scratch. IMHO if Satoshi choose AGPLv3 for Bitcoin Core, Bitcoin Core would have less dominance today.
even having to put in a notice with every software distribution can be overly burdensome for smaller IOT projects.
Is it really overly burdensome? At least for less restrictive license, you just need to make a list of used on About page
once. For example,
Library name
Library creator
Short description (usually 1 sentence to 1 paragraph)
Library license
Link to library source code