I kind of liked xhtml, though clearly it was not necessary for the web to be successful. I think the bigger issue is that W3C pursued this to the detriment of more important investments.
Reading over the minutes for the last W3C WG session before WHATWG was announced, the end result seems obvious. The eventual WHATWG folks were pushing for investment in web-as-an-app-platform and everyone else was focused on in retrospect very unimportant stuff.
“Hey, we need to be able to build applications.”
“Ok, but first we need compound documents.”
There was one group who thought they needed to build the web as Microsoft Word and another that wanted to create the platform on which Microsoft Word could be built.
> and another that wanted to create the platform on which Microsoft Word could be built.
Apparently they failed. The web version of Word is still far from having feature parity. Of course doc is one of those everything and the kitchen sink formats, so implementing it on top of a platform that was originally intended to share static documents is kind of a tall order.