Peter was Jewish and the Jews had their own cemeteries.But Simon Magus was probably buried up there ----
Well, Peter was crucified upside down and apparently missing his feet (a likely way of taking him down off the cross), an enemy of the state, and a nuisance in the chaos that was Nero's Rome.
Everyone, except for the Jews, and a few handsful of Christians was pagan. And the Jews were being expelled, and the Christians were being killed. How many Jewish (or Christian for that matter) places of burial do you think were lying around (so to speak)?
Besides, think of the magnificent metaphor. Peter, buried in the midst of the pagans he was sent to convert; St. Peter's, rising over their dead remains. Kind of a nice parallel to Jesus humbly born in the manger versus the splendour of Christ on His Throne in Revelation.
Really, Uncle Chip! Even when I was Presbyterian, I knew the early Christians worshipped in the Catacombs. Whose tombs do you think they were? They certainly weren't all Christians, it was too soon for that.
You have yet to post the citations for your sources on the "Simon Magus as the first pope" theory, so I will post an article from the New Advent Catholic Encylopedia on Simon Magus, the first Christian heretic (his doctrine seeming to have been a heathen type of Gnosticism):
http://www.newadvent.org/cathen/13797b.htm