I think nVidia stuck to their 'proprietary' business model. It just so happened that doing things their "own way" resulted in something less functional than the competition, not just in features but performance as well. They wanted the GF FX to strengthen development ties to their specific architecture, so they committed to both keeping it unique to themselves and making it similar to their past design.
Another idea that goes along with that is their commitment to a unified driver model, in which case similar architecture allows them to leverage past optimization effort into the "new" architecture. In this light, it could be said that the architectural elements they tried to carry forward were just too limited.
Finally, I think there was some perception that they set the trend, and that the market would follow where they led. That would be consistent with all of their approaches to the nv30. They may have learned better (the engineers, atleast, and the leadership if they didn't get too caught up in their success) with the 8500 from ATi, but I think it is a case of the subtle semantic difference between "momentum" and "inertia" in describing their evolution. I'm still wondering, as I have been for a while, how their engineering will adapt.
All of the above tie into their developer relations strategy, IMO.
I don't think any of these are anyone's fault besides nVidia's. I think this follows from what had been going for some time before the R300 launch. I also think this is a good opportunity for competition to return to the 3D space beyond just two parties, and I hope certain companies are up to taking advantage of the opportunity. *poke* Kristof and friends