Why did Descartes swap out God for a demon halfway through his argument?

Because a deceiving God clashed with where his argument was going. In his Meditations, Descartes first pushes doubt as far as he can: an all-powerful God could have made it so that there is no earth, no sky and no place at all while everything still looks the same, and could make him go wrong every time he adds two and three. That leaves him unable to trust any of his former beliefs. But in the Third Meditation he planned to prove that God exists and is no deceiver. So when he introduces his deceiver for good, he says it outright: he will suppose that "not God, who is supremely good and the source of truth, but rather some malicious demon" is fooling him. Philosopher Anthony Kenny argues the demon was substituted simply because it is "less offensive and less patently incoherent."

The demon had a job to do. Descartes noticed that his habitual opinions kept coming back, so he decided to pretend, for a time, that they were utterly false. He imagines the sky, colors and sounds as delusions devised to ensnare his judgment, and himself as having no hands, eyes or flesh. Even so, the demon can never make him nothing "so long as I think that I am something."

The swap didn't spare him trouble: in 1647, theologians at Leiden University accused him of holding "God to be a deceiver," which they called "contrary to the glory of God." Centuries later, the same worry returned as the "brain in a vat," with one key difference: a vat assumes you have a brain and a body, while Descartes wanted to doubt even his body and be sure only that he is a thinking thing.