An excellent question, which even the Treasury Department itself can't answer. The reasoning for selection of any of the specific people featured on Federal Reserve Notes was not recorded when the selection was made.

When the 1928 series Federal Reserve Notes were designed (the first series to be of the modern size and appearance), the Secretary of the Treasury (who had absolute legal authority on this subject) established a special committee to investigate the use of portraiture on currency. They were limited by law that no living person could appear on the notes, and otherwise had a free hand. The committee determined that presidents would be the best option, as they were highly recognizable to all Americans. The secretary overrode their decision slightly, to include two of his predecessors (Hamilton and Chase) and one other founding father (Franklin), who had a significant hand in shaping monetary history and design in the US, but otherwise presidents it was.

The source for this is the Bureau of Engraving and Printing's website FAQ, located here (9th question down).

From a purely speculative point of view, McKinley was a relatively recent president, and had been assassinated. He would have been highly recognizable, and considered a sort of martyr by at least some portions of the population (compare with Kennedy, for example). It could also be a matter of politics on the committee, or even just falling in to the right time period - that he was simply one of the most recent presidents who wasn't still alive. His predecessor Grover Cleveland appears on the $1000 bill for equally unknown reasons.