Is there any intuitive reason behind why should the eigenfunctions of observables form a basis for our Hilbert space ?
The first thing to realize is that this is not so much a statement of what is true as a statement of what we would like to be true. It's aspirational. For example, the position operator $\hat{x}$ does not have any eigenvectors in the space of wavefunctions $\Psi(x)$. But Dirac wanted that to be true anyway, so he invented the delta function.
There have been some comments to the effect that this principle is just the spectral theorem, but I think the same example shows that that's not quite right either. The spectral theorem comes in various flavors, which have various hypotheses. For example, there is a version for bounded operators, meaning operators $\hat{A}$ for which there exists some constant $M$ such that we always have $|\hat{A}\Psi|\le M|\Psi|$. The $\hat{x}$ operator doesn't satisfy this requirement, nor do most of the operators we care about in physics.
So this really is a physical principle, not a mathematical theorem. One way of understanding the physical motivation is the following. Our psychological experience of doing measurements in quantum mechanics is well described by the Copenhagen interpretation, in which measuring $\hat{x}$ to have a value $x$ seems to result in the collapse of the wavefunction into a state of definite $x$. One consequence of this is that if we measure $\hat{x}$ twice in a row on the same system, we always get the same result. But if there was no eigenstate corresponding to $x$, then this would be impossible. After measuring the value $x$, the system would be in some state which was still a mixture of $x$ values, and then the second time around we would have some probability of getting some other $x$.
Another way of describing the physical motivation is that we would like systems with continuous degrees of freedom to act like systems with discrete and finite degrees of freedom. This corresponds to our classical intuition that there is no such thing as a measurement of a real number, only a measurement of things like integers or fractions that approximate a real number. Since the spectral theorem holds as a mathematical theorem for finite-dimensional vector spaces, we state it as an aspiration that we would like continuous systems to behave in the same way.
At the other extreme, we would also like, as a matter of mathematical convenience, to be able to talk about a basis that is not just infinite, as in the spectral theorem, but continuous, so that expressing a vector in our basis means integrating, not just doing an infinite sum. This is what happens in the example of the $\hat{x}$ operator, and also, for example, when we take a Gaussian pulse in position space and Fourier transform it into momentum space. The physical motivation is the same, but the mathematics is very different.