As a Glasgow born Scot of Irish ancestry, I think I'm more qualified than most on here to say that Pegg's Scottish accent in that clip is more than acceptable. I'm sure he got the part over Paul McGillion simply because he's able to do a more convincing take on a Scottish accent.
McGillion's accent in Stargate Atlantis simply comes off as too fake, like he's putting it on (which he is). It might be convicing enough for American TV, but to me it sounds almost like a phonetic tour of the various accents you can hear in different regions of Scotland. His accent is - in the main - soft with a slight hint of a Highlands lilt, but then he throws in Glaswegian language and vernacular that someone with a Highland
"accent" would never use - "you're a cheeky wee bugger!" or "bloody hell!" for instance.
And no, Scotty should not be English. The whole thrust of the character was that he was Scottish because the Scots have a reputation as being wonderful engineers. The fact that Simon Pegg can do a more than passable Scottish accent makes the idea of changing the characters nationality slightly ridiculous.