I have a phone call with him planned tomorrow, so I'll ask about it again, but he told me this three weeks ago. Similar situation with the local suburban trains serving the German suburbs of Salzburg.
As far as the Bavarian State Government jumping in, as far as I know it's the Bayerische Eisenbahngesellschaft that handles the Ausschreibungen and they were the ones to award the contract.
And I didn't mean to give the impression that the equipment used is dreadful; not by any means. I simply meant that if you're used to travelling by ICE, in many ways it won't live up (though personally I find the older equipment to have more character, and enjoy being able to open the windows unlike on the very-nice-but-hermetically-sealed ICE trainsets). I'll also note that on my last trip coming from Prague, the coaches had no power/lights (which in its own way was neat because it made looking out the window after dark quite easy). Then we reached the border, the DB took over and stuck a DB locomotive on front, and suddenly the lights came on. Sometimes things just work better in Germany.
Thus far, the worst equipment I've had the displeasure of riding in in Europe has consistently been that of Tren Italia. Heck--even the Romanian and Hungarian stuff hasn't been too bad. But the Italian equipment...ugh. (This weekend included, as I traveled in a EuroCity with such equipment from Brig to Montreux).
Going back to the Prague topic, I usually stay in hostels when I travel, and the one I stayed at in Prague was excellent. If you're into that sort of thing, look up the Czech Inn online. It was great.