Because it's really trivial to implement. Other file systems are a lot more complex, especially to write.

It's also well supported by boot media like .isos, USB, network, etc.

There's probably little need for the overhead associated with other filesystems (security, multi-user support, crash recovery, etc.).

Personally I would have preferred a custom filesystem designed for the application but I can see the convenience of being FAT-compatible. I wouldn't expect these nodes to keep much data locally (if any).

The bootloader for the kernel (called Pure64) requires this. They chose FAT16 because it's compatible with most operating systems and also not unimportant; it's relatively easy to implement.