The question is really "why wasn't it?"... XUL, conceptually speaking, had a lot of potential, largely squandered by Mozilla-the-corporation. Somewhere between the implementation based on RDF (a literal plague over web tech) and confused commercial strategies, it died a slow death.
I call it "The Law of Conservation of Unusability". This states that whenever a technology gets to the point where it becomes usable, where you become comfortable with it and are happy with it, something will always happen that either makes it completely unusable or makes it significantly more difficult to work with. This "something" often has no reasonable justification and the reasons for it look quite artificial.
