It failed for the simple reason of money. For various reasons, some you state were the cause, and some you say WERENT the cause, people didnt want to subscribe to the game.

The poor design of the game was a huge problem, it wasnt stable, lag was horrible, and there was no real direction other than 'not FFXI'. When it went up for alpha originally, the servers exploded and it was down for something like 3 weeks (I cant recall) but rather than extending testing/release to make up for that missed testing period, they went ahead and stayed on that schedule, and ignored a good portion of player feedback. It only started to become really enjoyable when Yoshi took over. Also, copy/pasted terrains were a HUGE complaint. La Noscea, Thanalan and Coerthas weren't so bad, but did you ever spend a significant amount of time in the Shroud? It was awful and certainly not wide open. Just endless narrow paths of the same terrain over and over.

It does so well now because, along with the new game features/systems/etc, the team working on it now has been very open about their plans, why they do or cant do something, and most importantly, LISTEN TO THE PLAYERS (despite what these forums seem to think)