I think the big problem was that Romero was pulling in the reigns. He said as much in the video about how he didn't think the new team could handle the glorious vision he had for Quake. I really wish he'd just gone for it anyway, and he certainly should have had his hands very deeply in the coding process. You just can't hype something to that degree and not deliver something truly spectacular.
Of course, it must have been exponentially more difficult with each iteration to keep upping the ante so much. It also sucks that the technology was changing so fast that a 3-year development cycle left you looking pretty raw by the end of it. I think it'd be better now, since the economy has pretty much put a hold on how fast PCs are being upgraded (or how long it'll be before we see a new generation of consoles).