Simply say:
"I do not know how I was nominated, and although I am honored at the nomination and award, I feel that there are far more deserving individuals than I; therefore I cannot accept this high honor"
It would have shown President Obama to have been 'presidential', it would have shown his critics that he is not narcissitic and that he has a sense of humility.
As it is, he made himself a punch-line of a humiliating joke.
Seems so obvious to me. Critics would have been completely flat-footed. Bloggers would have had to retract their hastily published articles. Limbaugh would have been forced to say in shocked surprise that Obama did the right thing. It would have been devestating to his opponents, and would have given him some public momentum. Seems completely obvious to me, but what do I know?