What should I say to this employer?

On Friday, I met with an employer who agreed to hire me for the job (we even shook on it). This job is through the school I’m at. At the time of the meeting, he gave me a list of hours that he’d like me to work, and I said I’d take a look at them over the weekend and make sure that they are compatible with my schedule.
We talked about identification for the I-9, too. I said that I had a driver’s license and a copy of my birth certificate, which are acceptable List B and List C documents. He said that because of an audit by the IRS in the past, he requires an SSN card (I didn’t completely understand what he meant). I said that my SSN card is misplaced, but I knew my number and could get a new card ASAP. Those are the terms we left on on Friday.
Today, I got an e-mail saying the SSN card documentation is a strict policy for them, and I would not get it in a timely fashion, so they hired someone else with the documentation.
I had just sent a letter to another job I was offered, saying I wouldn’t be taking it because I got this on-campus job. So I went form having 3 jobs to having 0 jobs.
There are many things I find fishy about this:
1) Why do they require my SSN card?
2) Why can’t I use other acceptable documentation, like my license and my birth certificate: those that I had avaiable?
3) If the employer knew this would be a problem, why didn’t they let me know right away?
I haven’t e-mailed the employer back yet, but I’m also not sure of how I should feel about this. Personally, I think it was a curveball, but I may have just not played my cards right.

Oh yeah, and as I said, this job is through the school…the school I’m currently attending…the school that is doling out $8000 a year to me for a scholarship and has already proved that I’m a registered US citizen. I guess they can’t give me money if it is earned by labor…