To me the squid seemed to be picked because of how otherworldly it was supposed to be. It was something that the world couldn't blame on any one country or entity, and was designed to united everyone in world peace. Something so freaky and obviously out of this world.
But it also carried meta-textual meaning. In a world based loosely on DC properties and centered on teams bearing a resemble to the Justice League, it's no coincidence that Veidt destroys New York with a monster that looks like Starro. Moore seems to have been intentionally making a reference to the Justice League's first appearance, and turning the adventure on his head. Whereas most super teams engage the alien invader and fight in defense of Earth, this one was just a giant bomb that didn't even survive the trip, and the heroes couldn't engage it in combat.
It was a brilliant master stroke by Moore that uses a history of comics and genre fiction to make point. But, it only really works in the context of the graphic novel. For the movie, it was actually better to just go with Dr. Manhattan nuking everyone.