I just watched One Night Stand 2006 on the Network, and I was blown away with how engaged that crowd was during the main event. Booing Cena mercilessly, throwing back his shirt, the numerous anti-Cena chants...it was all pretty incredible. Cena, to his credit, knew what he was doing and played the heel really well (he even did the little things, like putting his feet on the ropes to try to get a pinfall). Of course ECW probably wouldn't have gotten this kind of response in too many cities around the US, but I never understood how the WWE missed the opportunity to do more things to take advantage of that crowd response. Guessing this died because McMahon kept inserting WWE players into the ECW 'brand', right? Was there any other behind the scenes reason for why the WWE couldn't capitalize on this?
Mostly as you noted. They wanted a third touring brand under the WWE umbrella, but didn't want Heyman's vision of it. But really you couldn't have just toured the Philly and New York markets alone, so it was a losing proposition from the start.
Although it does kind of blow my mind that ECW the TV show got replaced by NXT the reality show, which became NXT the developmental show that we have now. So in a way it came full circle and turned into what people wanted out of the "new" ECW all along.