The perl people didn't want to? My recollection of mod_perl was that you really needed to have everything about the server configured around the perl system, and it was quite a pain to get configured and working properly. My sysadmin skills weren't all that great 20+ years ago, but I did get it eventually working, but anything you wrote would only be able to be run on another mod_perl system, which were relatively uncommon (compared to the shared perl/cgi setups).
PHP was really more powerful and easier to read for many common scenarios compared to perl in those early days.
And while there were some scenarios where mod_perl was indeed more powerful... my experience was 1) those scenarios were relatively rare and 2) the community of people who had that experience was small, and never grew much (even when perl usage was on an uptake).
I found it interesting but didn't quite grasp the explanation. If mod_perl was too powerful and had access to too many of Apache's internals, why not just create a lighter version or make it configurable?