I think the two biggest reasons, at least from a purely subjective pov, is 1) it's greatest strength, the built in integrations with popular services, is also it's greatest weakness, and 2) getting trounced in the spec war.
But I think first and foremost, the problem is that the way phone is designed, with those deep integrations, just doesn't demo well to in a 'elevator pitch' scenerio like selling a phone. Paul Thurrott said it best, that what really makes the phone, is when you log in and suddenly YOUR stuff starts filling it up- photos, FB, twitter, etc. And I don't think that's a concept people can understand until they see that- and no matter how much someone explains that, they really need to see and experience it to understand how it fundamentally changes how they think of and use a modern smartphone.
And that leads to number 2- because right now, I think the average consumer only knows 'apps', and spec buzzwords, like multiple core, 3d, etc. And so those people that believe those things are important- aren't going to give WP7.5 a passing glance, when they walk into that store. And the fact that there's a new 'best phone ever' every freaking month, means that's what people are going to ask for.
Ultimately, I think the one thing that solves both problems is Win8/WP8. It will be able to have specs that should compete well with android phones, which should at least keep it in the ballpark. And also, if Win 8 is as succesfull as we think it will be, then people will get used to the idea of Metro and live tiles, and the idea of more integrated experiences within the core of the OS itself. And also, tier 1 developers WILL develop for Win 8, and therefore it should be much much miuch easier to port those apps to WP.
I think that's why Verizon and TMobile have been publically supportive of WP8- they realize once Win 8 does come out, with the full marketing blitz that will happen for it, and the buzz around Surface, etc, that the environment that they are selling WP8 into will be very different.
At least, I hope so. I love my Lumia 900, and would hate to be forced to android in the next 4 years.