I got interested in this a while back so I did a fair bit of reading. Here's what I learned.
There are three main advantages to air at sea level pressure over reduced pressure O2:
1. Reduced fire hazards.
2. No health issues
3. The Russians were already using it.
Actually, the shuttle was designed to use sea level air back when the notion of a joint US-Russian mission was still a joke. So air was a natural for the station even if the Russians hadn't joined us. Had we used anything else, incompatibility with the Russian atmosphere would have been a big problem. The different atmospheres was probably the biggest single technical problem that had to be overcome in ASTP.
Although the breathability of a cabin atmosphere depends mainly on the O2 partial pressure, the fire hazard depends more on the O2 percentage, regardless of the total pressure. A diluent gas reduces the fire hazard by carrying away heat. I've seen some films from Sealab showing what happens when they try to strike a match. Basically, nothing happens.
Everybody knows about the intensive fire safety campaign conducted on Apollo after the Apollo 1 fire. The hazard was certainly greatest before launch when the cabin was at (or somewhat above) sea level pressure, but it was still present in space at 5 psi cabin pressure. So everything that went into an Apollo cabin had to be carefully vetted for flammability in pure O2. That would have been completely impractical for the shuttle and especially the ISS, both of which were much bigger than the Apollo cabins and would carry lots of scientific experiments built by many different people.
O2 is very toxic at high partial pressures; it's a good example of too much of a good thing. Anything over 2-3 atm is likely to cause seizures; this has killed many divers. Although it seemed safe enough for the few weeks of an Apollo mission, nobody knew if 5 psi pure O2 was safe for much longer periods, and tests seemed to show some mild physiological changes. So for this reason and also to reduce the fire hazard, Skylab used a compromise atmosphere of 74/26 O2/N2 that could still be acommodated with the Apollo CSM.