This has recently become salient in my world, again. Internal candidates raise all kinds of issues – information asymmetry, historical baggage, sense of entitlement, and the like. There's a really basic awfulness in saying 'no' to somebody internal. Saying 'no' to anybody is unpleasant, but it isn't so bad with people you're unlikely ever to see again. You can be vague and relatively quick, and emerge soon enough with both parties' dignity intact. (That doesn't always happen, of course, but it should.) Once the deed is done, it's done, and you can get on with your work.