The President is allowed to clean house with Attorney Generals when he takes office, if he wants. But the AGs are supposed to be above political manipulation, and thus traditionally they are only removed from office for serious failures after that. Botched cases, criminal misconduct, that sort of thing. Forcing them out for refusing to investigate a Democrat is right out, for instance.
Congress is hounding this issue because Bush then took advantage of a little known clause of the Patriot Act that allows the appointment of AGs without the normal process of running them by Congress. And there are few things that get Congress's dander up faster then infringing on one of their privileges.
I have not seen the actual Patriot act clause that the White House used yet. But given the level of surprise about this, I suspect it may be another abuse of 'emergency powers' by the White House. Heck, given the speed with which the White House reversed course, it may be another of Gonzales's torturous legal interpretations.
It is somewhat amusing that the one of the biggest scandals of the Bush administration, at least in terms of publicity, is something that strictly speaking probably wasn't illegal.
Jay