Kinetic
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This theory was floated in order to rationalize Buddha's critique of Vedas. In spite of that, a bunch of loopholes remain. Off the top of my head, if Buddha was really an incarnation of Vishnu, how come Buddha was born human. All other incarnations of Vishnu were divine from birth. But it was only Buddha who had to toil to achieve 'nirvana'. Also, all incarnations have grand narratives in form of Puranas. But Buddha does not have any (like Kalki).
Our ancestors have given a good touch on it as well.
Buddha was made an incarnation of Vishnu mainly for two purposes as we know.
1) Buddhism was signifying some shortcomings of Vedic Aryans/Hinduism.
2) Buddhism though don't have followers in number, it got substantial supports from few early kings/emperors.
And our ancestors killed two birds with one stone by making Buddha incarnation of Vishnu.
Now come to your point. Its said that whenever Vishnu incarnates its in different forms, different times at different places. Buddha incarnated at a time when India was not united and various kings were often fighting with each other. You must have heard about "War of the Ten Kings". So here Vishnu takes a new incarnation to teach people the peaceful way of life, love for every living beings. Thats what Buddha did!!!! Splendid match up!!!
About divinity, it was added substantially as well like killing demons or bringing them to the right path which is always duty of Vishnu's incarnations. It was also said that he had all signs to be the Avatar of Vishnu like having 'Shankh, Chakra, Gada, Padma' markings on his feet etc etc.
Another reason was Buddhist 'non-violence' theory was a popular belief amongst number of Hindu traditions, mainly Vaishnavism. As per recorded history one of the influential sage and poet of Vaishnavism, Jayadeva Goswami was first found praising Buddha as incarnation of Vishnu. Though he might not be the first. Buddha was mentioned as avatar in Puranas as well.