The engine was an issue, aye, but:
- It was buggy
- Servers were bad
- Anyone who picked the city of Limsa Lominsa as their starting zone had a horrendously over-rendered cutscene that even high-end PCs of the time could barely handle
- Flower barrels littered around cities were rendered with the same amount of polygons and shaders as player models, further causing performance issues
- The afformentioned lack of content, be that story, dungeons, or whatever else
- A fatigue system which punished players who played more by slowing their levelling
- No end game content, so once you got to the end, that was it
- No simple things like auto-attack or even a minimap display
It was only after they put YoshiP in charge that improvements started happening, but the engine limit meant that expansions were impossible, and an MMO without expansions is basically doomed.