Also many standard didn't exist. Maybe today, with webgl and asm.js and web workers It's viable, but in the days native access was the only way to provide a smooth experience. See: http://techcrunch.com/2012/09/11/mark-zuckerberg-our-biggest...
Two main issues back then were scrolling perrformance and memory constraints.
We're working at image heavy microsites at lookcast and I can confirm memory issues and composition performances are still constraining what we can do on devices.
Extending the web standards would simply have been too much work and caused too much trouble.
Well, the most important thing people do, even on low-end devices, is browse the web.
Google has ChromeOS, with a HTML based shell. And there were some news articles that Google is merging ChromeOS and Android - we will see if those speculations were true.
It was awful. I owned a first gen palm pre, and it was dog slow.
Chrome OS is of course an attempt to build an OS entirely on HTML and Javascript, but you don't see it on phones because the memory, CPU and power requirements are too high. Eventually these problems will likely be solved, FirefoxOS was another attempt, but if we can't even do it right now there's no way it was a viable option back in 2005.
So why did they build Android on top of Java then? Wouldn't it have been much smarter to build Android on top of Javascript+HTML where suitable, possibly extending the standards where needed?
All these "apps" nowadays represent a move away from the web.