It was originally planned to be 2 expansions, with the Hydaelyn/Zodiark story concluding in 7.0. That's the main reason why the 6.0 MSQ is so long compared to previous expansions. There was a lot that needed to be included to wrap up the story even with all the planned story that ended up cut.

The decision was made to merge it into a single expansion because they were having trouble attracting and retaining new players due to the length of the MSQ. They felt they couldn't wait until 8.0 to have a new starting point for new characters. I'm expecting more information about that new starting point and how it's going to work to be released at the NA or EU FanFest.

Did Endwalker suffer a loss of potential quality because of this? I think so.

Is Endwalker a bad expansion as a result? No. It's still a good expansion. It's just not as good as it might have been if the story had been spread over 2 expansions. I understand why many players have been disappointed but personally I'd still rather be playing this game over other MMORPGs.