Jorge R. Frank wrote:

That is the reason why ISS must be in such a low orbit. The basic
physics are so plain and obvious, I think it's reasonable to believe
that only an idiot or a paranoid schizophrenic could believe otherwise.

It also had to do with keeping it at a low enough altitude so that it
didn't hit the radiation of the South Atlantic Anomaly:
http://en.wikipedia.org/wiki/South_Atlantic_Anomaly
....like Mir did, forcing the crew to seek shelter in the Soyuz reentry
module from the radiation of the inner magnetosphere when it did pass
through it.
It's a interesting mathematical balance of four things:

1.) Weight of station modules versus radiation protection they provide.
2.) Altitude versus air drag, and how often altitude reboosts are required.
3.) Convenience to crew in not periodically needing to take shelter.
4.) Orbital inclination versus payload that can be launched by NASA,
Russia, and ESA.

Since ISS needs fairly frequent resupply missions via Shuttle/Progress
(and wait till they get it up to a six-person crew, water recycling or
not) a pretty low orbit made sense as the supply vehicles could reboost it.
Von Braun's donut station was to be in a 1,000 mile high polar orbit.
That crew would be dead in pretty short order from radiation exposure.

Pat