IMHO, they should have invested more in WSL1 - it actually shares Windows resources and runs under the Windows kernel rather than trying to do clever things with virtual machines.
Elegant but really hard to implement and maintain (at least on top of the NT base (which I mention because illumos and some BSDs implement Linux compat more easily by being unix-like in the first place)); it's much like how WINE is pretty decent but will always have more compatibility problems than just running Windows in a VM.
I think the reason they gave up is because the Linux kernel has a LOT of syscalls, and every single one would have to be implemented flawlessly in order to properly support all of userspace. They'd basically be implementing a second Linux kernel.
Also because filesystem access translation results in very poor performance vs native Linux filesystem, which is basically insurmountable because of Windows design.
