I have an electroaire ignition (the STC'ed model) and have had this conversation with their folks before. Based on my own experience in my aircraft and what they told me about how the system is built, I can say that at least one reason they recommend toggle switches is because of the way the rotary key switches are wired and the likely issues that result while doing the run-up mag/EI checks with a rotary switch.
The short version is this: During the typical run-up, when switching the rotary switch from BOTH to L and then to R, the likelihood of a backfire taking place when moving the key from L to R is quite high. I have experienced this myself in my aircraft.
Why this happens: When the key is in the BOTH/RUN position, and one moves to it the L position, the electronic ignition shuts off and the engine runs only on the left mag (assuming one mag and one elec ignition module, installed in place of the R mag). This works fine since the mag will fire immediately as soon as it is switched to do so.
However, when moving from the L (mag) key position to the R (EI) key position, the EI system is energized and requires two rotations of the mechanism *before* it will actually fire a spark. This is a result of the sensor readings the system takes to ensure the engine is in fact turning at operating speed. While the system is watching for those two rotations to take place, the L mag is - of course - also disabled. As a result, no sparks are being generated to burn the fuel/air mixture that collects in the cylinders during those rotations. By the time the EI "sees" the two rotations and fires up and sparks for the first time, excessive unburned fuel/air mixture is present in the engine and exhaust from the "non-fired" cycles of the engine and a pop/backfire can (and often does) result. Not good for your exhaust (or anything else for that matter).
In my airplane, I have been lazy and have not yet replaced the rotary switch with toggle switches. Instead, I found I can turn the key between the L and R switch positions very, very slowly. On my rotary switch, the result of doing that is to have both the mag and the EI running at the same time since the electrical contacts in the switch apparently overlap slightly (both connected in the switch as it travels between L and R). That may not be the case on all rotary key switches -- I might just be lucky on mine. But if I make the change between L and R too fast, backfire. Not good.
Of course, switching back the other direction, from R (the EI) to L (the mag) works fine, since the mag fires on the first turn and no accumulation of mixture occurs.
With toggle switches, you don't typically have a situation with the engine running where the EI starts up all alone without the mag side also running and burning fuel. Hence essentially no backfire risk.
And that's why. Hope that helps.
greg