I also remember that a lot of it was going to based on .NET, and it wasn't mature enough/they weren't able to get it mature enough. The whole process was also impacted by security issues reaching a crisis level.
But #1 would seem to be more ambition than Microsoft could deliver at the time.
Bill Gates actually touched that topic in is Reddit AMA. If I remember correctly, the bar was set up too high (i.e relational file system) and within the constrains it was a big challenge and at some point they had to deliver.