My take is this:
WinFS was and remains a very grand vision. On the way to realising that vision Microsoft has produced a blethora of cool stuff like
ADO.NET Entities etc. But the unfortunate truth is that WinFS as a whole is probably still some way off. So Microsoft have rightly
decided to share bits of WinFS that are mature and useful.

As for what the problem with WinFS is, I am reasonably convinced that it is the performance of the File System itself. I've heard
numerous whispers and even the odd admission to that effect