I think XML fit well into the turn-of-the-millenium zeitgeist: GUIs would hide the verbosity; the proliferation of bespoke tags would map cleanly to OOP representations; middleware could manipulate and transform data generically, allowing anything to plug into anything else (even over the Internet!).

Whilst lots of impressive things were built, the overall dream was always just out of reach. Domain-specific tooling is expensive to produce and maintain, and often gives something that's not quite what we want (as an extreme example, think of (X)HTML generated by Dreamweaver or FrontPage); generic XML processors/editors don't offer much beyond avoiding syntax/nesting errors; so often it was simplest to interact directly with the markup, where the verbosity, namespacing, normalisation, etc. wouldn't be automated-away.

XML's tree model was also leaky: I've worked with many data formats which look like XML, but actually require various (bespoke!) amounts of preprocessing, templating, dereferencing, etc. which either don't fit the XML model (e.g. graphs or DAGs), or just avoid it (e.g. sprinkling custom grammar like `${foo.bar}` in their text, rather than XML elements like `<ref name="foo.bar" />`). Of course, it was hard to predict how those systems would interact with XML features like namespaces, comments, etc. which made generic processing/transforming middleware less plug-and-play. That, plus billion-laugh mitigation, etc. contributed to a downward spiral of quality, where software would not bother supporting the full generality of XML, and only allowed its own particular subset of functionality, written in one specific way that it expected. That made the processors/transformers even less useful; and so on until eventually we just had a bunch of bespoke, incompatible formats again. At which point, many just threw up their hands and switched to JSON, since at least that was simpler, less verbose and easier to parse... depending whether you support comments... and maybe trailing commas...; or better yet, just stick to YAML. Or TOML.....

(My favourite example: at an old job, I maintained an old server that sent orders from our ecommerce site to third party systems, using a standard "cXML" format. Another team built a replacement for it, I helped them by providing real example documents to test with, and eventually the switch was made. Shortly after, customers were receiving dozens of times what they ordered! It turned out that a third-party was including an XML declaration like `<?xml>` at the start of their response, which caused the new system to give a parse failure: it treated that as an error, assumed the order had failed, and retried; over and over again!)