WHS wasn't out in 1999. The latest update for it was released yesterday.
Acer, HP, Asus, VIA and Lenovo are all using WHS for their Time Capsule-like solution. And then there's some smaller outfits like Tranquil.
No idea if it was a commercial failure. Seeing how they're making a new version (it's in beta), it can't have been that bad. I just wish they hadn't botched up the whole reliability thing at launch and then waited a year or so to patch it.
WHS's main selling point is centralised backup, which Time Capsule does far far simpler.
WHS is missing out on 'desireable' features, here are a few I've requested in the past:
Windows Media Center Server - the server houses the TV tuners and makes recordings and stores programmes centrally, so WMC in Windows streams programmes off the server.
WSUS Lite - far easier than downloading gigabytes of updates for all machines separately
Roaming profiles within a home network environment would be useful, but Microsoft would have to make the process much simpler to administer. Even with SBS you can make one tiny change and suddenly the 'easy' tools become useless and you have to use MMC.
TS Gateway - I understand WHS has a TS gateway built-in, but it's rendered useless because the Home SKUs of Windows have the RDP server disabled for non-assistance tasks. Of course to get this working requires home users have a publically routable static
IP address, a non-evil ISP, and know how to configure a home router.