I don't understand what's your point. How does the existence of copyright breach bears on the fact that Xanadu was a fever dream and not a real solution to real problems and hence consigned to the list of fanciful technologies that never gained adoption?
I read the quoted text as "Xanadu's 'transclusion' can't work in the real world because of copyright and legal issues." But neither of those are issues for popular existing technologies.
Rereading your parent comment, I'm guessing my confusion is in connecting that quote to why Xanadu fails to solve "the concrete problem" or endorsing "a solution in search of a problem"/addressing "worse is better."
My comment was intended as a +1 to @Rygian: Xanadu was prescient wrt. file management and an opportunity to push back against Freenet=CSAM
I think Ted Nelson had a vision but not a good design. I agree with Gwern, his design was a materialization of his vision of a solution. It was not the response to a problem. I like Ted Nelson's ideas but sadly what he built was just not a very useful piece of software.
