The thing is, Xanadu
was implemented -- twice, at autodesk, prior to 1990. (It wasn't released for political reasons until 1999.) Please check your facts before saying something clearly untrue like "Xanadu couldn't be implemented".
Even if it wasn't -- being a first mover by sacrificing quality can get you greater adoption over superior competitors. Compare the Mac, released in 1984, with the Amiga 1000, released in 1985. By being delayed by a year, the Amiga was able to have all the features that the Mac team wanted but were told that they couldn't have -- color graphics, multitasking, and an actually usable amount of RAM, at about half the price of the Mac. The Mac, on the other hand, was the follow-up to the Lisa, which was technically superior feature-wise but too slow to be usable. Both the Amiga and the Lisa lie forgotten, and people come to believe that the Mac was the first consumer GUI machine or the best consumer GUI machine of its time -- or that its limitations were unavoidable. In reality, a combination of luck and good PR warped our sense of history.
The reality is that the web was not the first hypertext system, or the best, and the features that it lacked were implemented and functional in its competition. The web gained a following through a combination of being free (at a time when most hypertext systems, including Xanadu, were proprietary and commercial) and stupid enough that it could be reimplemented poorly by beginner programmers -- which, of course, was its aim.
The Web was designed as a model to teach non-programmers the concepts behind Enquire, Tim Berners-Lee's "real" hypertext system. The fact that the web escaped and Enquire didn't is a tragedy.
Lots of crappy things become the basis of culture, commerce, and communications. Quality doesn't particularly matter when it comes to being the basis of things, and nuance and complexity work against you if you want wide adoption. But, when something crappy becomes so widespread, its flaws become far more dangerous.
Lack of permanent stable addressing made possible the DMCA safe harbor provision (and thus systems like ContentID that delete your content at random on the off-chance that you were quoting somebody famous). Lack of bidirectional links caused the monetization system for the web to be based on advertising. Embedded markup created the need for complex javascript kludges to navigate deeply hierarchical DOM structures in order to perform simple transformation.
The web is a long series of poorly thought out decisions, all of which in the end led to both the grey hairs, premature heart attacks, and hefty wallets of people on this site. We're stuck with it now, because we've created a broken system and added structure on top of it to keep it from being fixed. And we, as an industry, profit from its brokenness. But, it would be intellectually dishonest to pretend that it isn't broken -- or that the ways in which it was broken were unavoidable. They were avoidable, and they were avoided; it's sheer bad luck that the web was adopted over its superior brethren.