Boeing had already a fuselage for the 757 that fit the bill. It came originally from the 707 via the 727. To accommodate more baggage, the rear fuselage was deeper, as on the 737. During development Boeing engineers were afraid that directional stability might be insufficient with a deeper forward fuselage, so the lower half of the fuselage was kept from the 727 instead of switching to the deeper fuselage of the 737. A twin-aisle fuselage would had restricted the possible variants with fewer seats too much.
From a contribution by OldAeroGuy to this discussion on Airliners.net:
The 757 entered design using the 727 fuselage as baseline as it was
originally a 727 derivative, so it had the 727 dimensions for fore and
aft lower lobes. It was later decided to evaluate a deeper forebody
lower lobe, ala the 737. The forward fuselage cross section decision
was made to meet a manufacturing commitment before all wind tunnel
testing was complete. Early indications were that if the deeper lower
lobe was used for the forebody, directional stability would have been
reduced to an undesireable level. When all testing was finished, it
was shown that a deeper forward lobe would have been OK.
Unfortunately, it was too late to revise the manufacturing plans.
I was a member of the wind tunnel testing team at the time the 757 was
being developed and was aware of the situation. After the 757 was
certified, I asked the 757 Chief Engineer what design decisions he
would like to change with the benefit of hindsight. The forward lower
lobe decision was the first on his list.
A wider and higher fuselage causes more drag directly but will also require a larger tail surface because of its shorter length, causing more mass and drag indirectly. Note that the Airbus A318, the shortest member of the A320 family has a taller vertical tail than all other members. Using the slender fuselage and the RB-211 engines made the 757 very fuel efficient, which was very important for Boeing just after the second oil shock of 1979-1980. A larger fuselage would had reduced efficiency.
From this Aviation Week article:
A single aisle worked better for the lower end, but did not stretch
very well. A twin aisle worked better for the upper end, but equally
did not shrink well. As a result, for almost six years in the 1970s,
the company exhaustively studied two concepts: a single-aisle twin
dubbed the 7N7 and a widebody twin called the 7X7.
Most observers at the time believed Boeing would develop one or the
other but not both, at least not immediately. It was therefore with
some surprise that between 1978-79, over a period of less than eight
months, the company ambitiously began the simultaneous development of
both aircraft. The 7X7 became the 767 in July 1978, while the 757,
formerly the 7N7, received the production go-ahead the following