Totally agree.
I think they had or have commercial aspirations. That along with the strong desire to curate the experience are likely what lead to the walled garden effect.
The problem with walled gardens ( well, I hate them always ) is that they only work if you have the resources to pull off the full experience by yourself. Elementary really never had that and, before they could get there, they stumbled internally and killed their execution. It is going to be really hard to get it back.
Whatever their original aspirations, salvaging what they have into a distro agnostic DE is probably their best hope for relevance and survival. With a curated Flatpak store, they may even be able to someday pull off their walled garden in a cross-distro way. If it ever became big enough, they could take another run at being a full distro.
As it is, Elementary is on borrowed time. That would be the case even if the Wayland clock was not ticking but ticking it is.
First line of the the description of Zorin on zorin.com/os
“Zorin OS is the alternative to Windows”
https://zorin.com/os/