I think it has something to do with the variance in elevation between the Atlantic & Pacific & the artificial lakes in the canal (Lake Gatun & Miraflores). I think I read somewhere that the Chagres River, which crosses the canal several times, is prone to flooding which made a sea level canal unworkable.
I am in the process of reading the Path Between the Seas by McCullough--it's a really fat book but quite engrossing .It explains the construction difficulties & a whole lot more--quite a bit of history that accompanies the Panama Canal story I rec. the book highly! I als hear there's a video of the same name or similar