Difficult one to analyse, as it was a complex approach by both players rather than a single path to victory, and Black Market makes it asymmetrical.
Broadly though I'd say the following:
Spice Merchant is going to be better than Bishop at the goal of creating a Peddler based engine, as Spice Merchant draws cards when it trashes, and provides the curcial +buy when you hit that point. However Bishop I would say has its role and ought to be bought at some stage as it will clear out the estates and let the Peddlers be turned into heaps of VP.
Native Village, of course, is widely recognised as a card that slows your overall tempo, and takes a lot of carefulness to get use out of. If you're trying to rush towards Peddlers and large amounts of $ from peddlers, then I would expect each buy of Native Village to slow this progress.
With a 3/4 split I personally would have gone for Spice Merchant / Silver, though I think Black Market was a valid choice because of the strength of some of the BM-deck cards.
With a 5/2 split, I think Witch was definitely sensible, but I'd personally have been more tempted by Witch / Haven than Witch / NV. Why? Well, examine your Turn 4, for example, and what would have happened had the NV been a Haven. I'd even say that Witch/nothing might have been good, especially as you quickly acquired 2 witches, and 2 witches + BM could have been quite fast (though I suspect, not fast enough for a Colony game).
Of course, I see that you were going for the small chance of having NV and 2 witches played in one turn...
Ultimately though, I think that the reason your opponent started running away with Peddlers is because he got there first. Once you've got a Peddler or two its much easier to play a sufficient chain to bring down the price of future peddlers, then its all about how many buys you can generate. His buys were more focused towards generating buys and thinning the deck, hence he won the race.