For the most part, I think that Gen I had the best all around set of Pokemon. All of the generations have good Pokemon, and all of them have bad ones as well. The difference for me is that the first gen Pokemon a) have a better terrible:good ratio than the other gens, and b) all look like a coherent group.
There were a lot of monsters created for Gen I. 190 were planned to be in game*, and some of the monsters that you can see in production art never made it into the games. Thefore, the monsters that made it in were considered to be the better ones.
* Some of the ones that weren't put into Gen I made it into Gen II.
In never generations, designers are given a typing and asked to create a Pokemon based around that typing. It seems like, for the most part, they only make one design (as they are very hard to make properly), and that design is the one that is used. Thus, rather than picking a "best of the best," they simply try to fill the quota with the best designs they can manage - and when they do that, someone is always going to have an off day where they create a terrible design, just as they have days where they make an incredible one.
(Yes, I can give sources for this, if anyone accuses me of making things up. I just don't want to spend the time digging them up right now.)