UPDATE: This question was the subject of my blog on June 18th, 2012. Thanks for the great question!
Why? I want to know if this was a design decision and if so, what prompted it?
You are essentially asking for the minutes of the meeting of the ANSI C design committee, and I don't have those handy. If your question can only be answered definitively by someone who was in the room that day, then you're going to have to find someone who was in that room.
However, I can answer a broader question:
What are some of the factors that lead a language design committee to leave the behaviour of a legal program (*) "undefined" or "implementation defined" (**)?
The first major factor is: are there two existing implementations of the language in the marketplace that disagree on the behaviour of a particular program? If FooCorp's compiler compiles M(A(), B()) as "call A, call B, call M", and BarCorp's compiler compiles it as "call B, call A, call M", and neither is the "obviously correct" behaviour then there is strong incentive to the language design committee to say "you're both right", and make it implementation defined behaviour. Particularly this is the case if FooCorp and BarCorp both have representatives on the committee.
The next major factor is: does the feature naturally present many different possibilities for implementation? For example, in C# the compiler's analysis of a "query comprehension" expression is specified as "do a syntactic transformation into an equivalent program that does not have query comprehensions, and then analyze that program normally". There is very little freedom for an implementation to do otherwise.
By contrast, the C# specification says that the foreach loop should be treated as the equivalent while loop inside a try block, but allows the implementation some flexibility. A C# compiler is permitted to say, for example "I know how to implement foreach loop semantics more efficiently over an array" and use the array's indexing feature rather than converting the array to a sequence as the specification suggests it should.
A third factor is: is the feature so complex that a detailed breakdown of its exact behaviour would be difficult or expensive to specify? The C# specification says very little indeed about how anonymous methods, lambda expressions, expression trees, dynamic calls, iterator blocks and async blocks are to be implemented; it merely describes the desired semantics and some restrictions on behaviour, and leaves the rest up to the implementation.
A fourth factor is: does the feature impose a high burden on the compiler to analyze? For example, in C# if you have:
Func<int, int> f1 = (int x)=>x + 1;
Func<int, int> f2 = (int x)=>x + 1;
bool b = object.ReferenceEquals(f1, f2);
Suppose we require b to be true. How are you going to determine when two functions are "the same"? Doing an "intensionality" analysis -- do the function bodies have the same content? -- is hard, and doing an "extensionality" analysis -- do the functions have the same results when given the same inputs? -- is even harder. A language specification committee should seek to minimize the number of open research problems that an implementation team has to solve!
In C# this is therefore left to be implementation-defined; a compiler can choose to make them reference equal or not at its discretion.
A fifth factor is: does the feature impose a high burden on the runtime environment?
For example, in C# dereferencing past the end of an array is well-defined; it produces an array-index-was-out-of-bounds exception. This feature can be implemented with a small -- not zero, but small -- cost at runtime. Calling an instance or virtual method with a null receiver is defined as producing a null-was-dereferenced exception; again, this can be implemented with a small, but non-zero cost. The benefit of eliminating the undefined behaviour pays for the small runtime cost.
A sixth factor is: does making the behaviour defined preclude some major optimization? For example, C# defines the ordering of side effects when observed from the thread that causes the side effects. But the behaviour of a program that observes side effects of one thread from another thread is implementation-defined except for a few "special" side effects. (Like a volatile write, or entering a lock.) If the C# language required that all threads observe the same side effects in the same order then we would have to restrict modern processors from doing their jobs efficiently; modern processors depend on out-of-order execution and sophisticated caching strategies to obtain their high level of performance.
Those are just a few factors that come to mind; there are of course many, many other factors that language design committees debate before making a feature "implementation defined" or "undefined".
Now let's return to your specific example.
The C# language does make that behaviour strictly defined(?); the side effect of the increment is observed to happen before the side effect of the assignment. So there cannot be any "well, it's just impossible" argument there, because it is possible to choose a behaviour and stick to it. Nor does this preclude major opportunities for optimizations. And there are not a multiplicity of possible complex implementation strategies.
My guess, therefore, and I emphasize that this is a guess, is that the C language committee made ordering of side effects into implementation defined behaviour because there were multiple compilers in the marketplace that did it differently, none was clearly "more correct", and the committee was unwilling to tell half of them that they were wrong.
(*) Or, sometimes, its compiler! But let's ignore that factor.
(**) "Undefined" behaviour means that the code can do anything, including erasing your hard disk. The compiler is not required to generate code that has any particular behaviour, and not required to tell you that it is generating code with undefined behaviour. "Implementation defined" behaviour means that the compiler author is given considerable freedom in choice of implementation strategy, but is required to pick a strategy, use it consistently, and document that choice.
(?) When observed from a single thread, of course.
