Because of the gravitational influence of Earth there's no stable Moon-Sun L1 point. The Earth would keep pushing anything there one way and then the other.
Also, the extant atmosphere of Mars is a big advantage. It's not much but it helps at lot relative to vacuum with soaking up heat, letting you synthesize oxygen, etc. And while Mars doesn't have much free hydrogen it has a lot more than the Moon does.
Oh, and then there's daylight. A day on Mars is about a day on the Earth. A day on the Moon is a month. So you've got to have lots and lots of batteries if you're going to last out a lunar night. On Mars you just need a bit more mass of batteries than you have of solar panels.
And there's more gravity on Mars which might be important. We know what 1G does to the body and we know what 0G does to the body but nobody knows if there's a difference between the .4G you get on Mars and the .15G you get on the Moon.
Well, L1 is not stable anyways so you would also have to correct for that. Also, due to the fixed rotation Moon has mountains of ethernal light that could provide constant solar power.
And last but not least, the lower gravity on the moon (according to wikipedia) makes space elevators possible even with current technologies. As those would make space travel a lot easier, thats a huge argument to colonize the moon first.
And there's also the shorter transit time from Earth. Really, there are a lot of good reasons to think about establishing a settlement on the Moon before Mars. But I still think that trying to terraform the Mooon is a bit unreasonable.
And yes, L1 is unstable. But the lower bound on how little fuel you have to spend staying at the Mars-Sun L1 is much, much smaller than the Moon-Sun L1. I'd guess 10 m/s of delta-v every year for the Mars/Sun one and 10,000 m/s every year for the Moon/Sun.
Mars has atmosphere (not much, but enough to process into useful gases), water (in the form of ice), and a larger variety of surface materials than the moon.
Mars is substantially easier to establish a long-term operation on than the moon since you can create many of the materials you need onsite.
An interesting theme in KSR's mars trilogy was robot miner machines making a mohole pit and "a couple KM down" the martian atmosphere is either sea level earth air pressure or at a somewhat different depth the atmosphere is comfy warm. I don't remember the modeling of how deep or how far apart but it didn't seem terribly unrealistic compared to the grand scheme of teraforming mars. Obviously a thickened atmosphere would not require moholes quite as deep. Possibly to a useful level. True, increasing surface pressure on mars by a factor of ten means you'll still die on the surface, but to a first approximation you just made your mohole 1/10th as deep and 1/10th the construction time and cost.
The atmosphere on Mars is actually pretty nice at an altitude of negative a couple kilometers, which doesn't exist naturally but we're quite talented at building horizontal tunnels that long so pointing downward can't be that hard.
If you need raw material, robots that never leave the mine don't have scalability problems that human deep mines have and on mars liquid water would be a valuable commodity and robots don't mind water anyway, and solar powered robots can be left alone to generate iron ingots for construction, and for environmental reasons there's no reason to make 100 shallow pits when one deep mine produces just as much and is valuable real estate after digging is complete.
On the earth you can't point a large TBM downward because it'll flood or overheat in just a couple miles or less, but on mars it might be quite useful.
The problem with moholes is eventually you end up with the submarine problem where no matter how tough your metal hole liner is in an abstract sense, it will collapse under rock pressures. So you can't bore a hole clean thru a planet, however interesting that idea sounds.
(edited to add, I looked up data more recent than KSRs old book series, looks like bare rock mines are only possible on mars due to rock blowing out to a depth of 10 KM (better than earth, lower gravity), of course the sky's the limit with steel liners. And at a mere 5 deg/km temp increase on mars, the temp will be cold but more habitable than the surface)
