That was an era of different technology. Stylus alone (resistive touch) is not a good general purpose input system but works really well for inputting hand writing or drawing. Capacitive touch lacks fine resolution so it's not good for drawing but it's fantastic for UI because it supports multi-touch. Today we don't have to be shackled by the technological limits that held the Newton back. The Surface has both types of touch sensors so it can match the appropriate sensor to the appropriate use (drawing/writing or touch-based UI). Also, modern mobile computers have vastly more processing power and storage capabilities so, ironically, handwriting recognition is not necessary. The raw input can simply be stored away (as a vector graphic, perhaps, or even just as raw pixels).

Also, the general pattern of "someone tried that once, and they failed, so nobody should ever do that" is a really terrible way to go about engineering. Wile E. Coyote should not be a roll model. Just because someone failed at something similar. Just because YOU failed at something similar, doesn't mean you should give up on the whole idea.