Why SHA256 and so many coins? What are the arguments

You'd have to ask a dev, but my guesses would be these:
1: People may have ASICs layin around that are no longer profitable to mine
BTC with, so they can't mine and they can't sell them. This way those people can have something new to mine with those ASICs.
2: Does it really matter how many coins there are? As long as there's a cap it really shouldn't matter as inflation can only go so far. But perhaps it's so that they can have a large block reward?