It appeared to me (from far outside) that Intel was trying to segment the market into "Affordable Home and office PC:s with x86" and "Expensive serious computing with itanium". Having everything so different was a feature, to justify the eyewateringly expensive itanium pricetag.
Seems shortsighted (I'm not saying you're wrong, I can imagine Intel being shortsighted). Surely the advantage of artificial segmentation is that it's artificial: you don't double up the R&D costs.
Maybe they thought they would just freeze x86 architecturally going forward and Itanium would be nearly all future R&D. Not a bet I would have taken but Intel probably felt pretty unstoppable back then.
