At Safari's inception there were good Mac browsers. Camino and OmniWeb were capable browsers and Cocoa native. While Netscape and IE of the time sucked on Mac they weren't the only options.
I think Safari was more about guaranteeing a native browser on the Mac. There was a lot of speculation they'd adopt Camino, they hired its lead developer, but instead went with KHTML.
I'd guess they didn't want to be tied to Mozilla after watching Netscape flail around for so long. KHTML was so much lighter than Gecko as well with far less baggage to work around.
Camino was (is?) a Cocoa wrapper around Gecko, an engine for which OSX was a second class target, that steadfastly refused to use native components for basic UI (to this day there are basic OSX behaviors that gecko seems to struggle with), and was certainly not generically embeddable in other applications - Safari came with the WebKit system framework remember.
OmniWeb was similarly nowhere near the level of compatibility with real web content, and while obviously made by a Mac centric company, couldn't be used as a system component.
KHTML then has additional advantages - lower memory footprint, better responsiveness, designed specifically to be a component that could be embedded in arbitrary apps and used for non browser purposes.
Camino was a good web browser for 2002 and head and shoulders above other options on Mac until Safari was released. Netscape/Mozilla Suite was a dog on the Mac because as you say it was a secondary target. It also had much better performance than iCab or OmniWeb, including much better CSS support. IE had been good but development largely stopped so it had not kept up with the web.
I think Apple going with KHTML was a better idea than buying out another browser. They got a nice small baseline to build on rather than a lot of legacy code to refactor. Had they gone with Camino I doubt they could have gotten Gecko running on the original iPhone.
CyberDog was an interesting project but not really a great browser, especially compared to Netscape of the time. Same with its e-mail and news reader components. They were just ok at best and fairly memory hungry.
CyberDog was built on OpenDoc which had its own set of problems.
I think Safari was more about guaranteeing a native browser on the Mac. There was a lot of speculation they'd adopt Camino, they hired its lead developer, but instead went with KHTML.
I'd guess they didn't want to be tied to Mozilla after watching Netscape flail around for so long. KHTML was so much lighter than Gecko as well with far less baggage to work around.