I wasn't there when the decision was made, but it was not too bad an environment. It ran a web server with quite a complex web application, multiple daemons monitoring and controlling various devices, SNMP, various DMAs into the FPGA's block memory to shunt data back and forth for processing in various ways.
I probably would have looked at lighter options like VxWorks or QNX or something but for our new products with a dual core A9 Linux suits us really well.
If its just for an IP stack, there's easier, more standard, less resource intensive ways of doing that than using a version of Linux with all its drawbacks.