Flexibility interacts poorly with composability. When everything is specialised at the whim of the developer, tying different pieces together is difficult. A lot of the rigidity in programming languages is there because it gives programmers (and programs) common ground to work from. Flexibility usually interacts poorly with performance as well. Specialisation to a domain is usually faster and can be dramatically fast…
Do you have examples of other "rebuild the world in lisp" projects? I'd be curious to see how and why historical attempts have foundered
Emacs is probably a success story in that genre. It's possible to use it as the first process booted iiuc. I certainly have days where it's the only process I run after gnome has booted.
Guix has replaced a lot of Linux userspace infra with scheme. Successfully as far as I can tell.
I think there are (non-emacs...) operating systems in various states of progress written in lisp.
Sometimes one finds a compiler written in lisp which doesn't have a runtime in C. Jitawa, Maru are the only two I know of. All the others I've looked at seem to be built on top of C. I think they're both finished/abandoned.
My rebuild everything project is still in the better compiler phase so I might be projecting. Hopefully I'll remember better anecdotes later.