Shuttle was canceled because its bay wasn't needed, it was overly expensive, and its service record was pretty accurately tracking the projected 1 shuttle loss for every ~50 flights. There wasn't a strong commitment to the missions at the time, so making something completely new was out of the question. But there was a lot politically and strategically riding on Shuttle, so they had to find some way of keeping some lights on. Those points can be elaborated, but the decision really wasn't much more complicated than that.

The F1 and SSME are apples and oranges. They have separate uses and achievements for their times. I haven't heard of either being widely considered objectively superior to the other.