...it was a application builder for people who don't code...People have been trying to build application builders for beginners who don't (yet) code at least since Kemeny and Kurtz invented BASIC in 1964. Successful intentional examples of this include BASIC, Logo, Hypercard, and PHP.
History shows that people are willing to use these until they realize that programming is hard, and then they hire someone to do it for them. History also shows that developers are completely oblivious to the actual challenges that end users will face until they put it in front of them. For a random example, most developers will hapilly expose the file system to users without realizing that in usability studies, most computer using college graduates do not understand the idea of a file system with directories inside of directories, files at every level, and two files named the same thing in two different directories actually being different files.
You can't develop something for people who don't code without putting it in front of people who don't code and accepting harsh feedback. By their own admission, they failed to do this basic thing. Without even looking, I can guarantee that their half-million lines of code and whiz bang technology is entirely unusable by their target audience. And anyone in their target audience who decides to stick with the technology will quickly want to hire a programmer. Whose first question will be whether they can rewrite the application in a more familiar environment. Which they will as soon as they dare. Therefore no matter how much you don't think you're in competition with mainstream programming environments, you really, really are.
Don't believe me? Excel has proven to be an insanely successful technology for getting non-programmers to write useful applications. Ever talked to a programmer who inherited a complex application written in Excel by a non-programmer? My point is made.
I am sure the YC person is as aware of this as I am. What do we have? We have a team that devoted an insane amount of time in creating a piece of cool technology which certainly is useless for its target purpose. This team clearly has no idea how to make something that customers want. Furthermore they don't show any sign of caring about how to make a successful business. They may be fun to talk to about technology, but is this a group you want to invest in?
YC made the obviously right choice here. And asked the right questions.