I think they burned through too much material too quickly. Had they interspersed the more supernatural plotlines throughout more "typically soap" plotlines in the modern era, they could have rationed out the material and left the viewer wanting more. Instead, they felt they had to keep pushing the wackier stuff because (I guess) they were afraid that more typical soap fare would cause too many people to lose interest.
I was watching the lead-up to 1897 (Quentin being released from the West Wing and his possession story with the kids) this past week and was amazed at how many sub-plots they had going at once. The show typically only had one "major" story going at a time, with perhaps one or two minor sub-plots brewing quietly. In this period every single episode (every single scene) had so much action going on that there seemed no time to "stop and breathe". I mean, Joe Haskell basically went insane right in front of us (all bug-eyed and jumpy), but there was so much happening with the whole Collins family, Maggie, Dr. Hoffman, etc. that he didn't even get a proper send-off. He'd seen Chris turn into a werewolf and tried to kidnap Amy to get her away from that house of crazy, but then just sort of wandered away from Collinwood and barely mentioned afterwards. I read elsewhere that he ended up in Wyncliff, but I don't recall the mention onscreen.
The choice to put plot movement into hyperdrive led to the characters not having as much depth. The decision to give 1897 another few months meant bringing in a veritable boatload of new, narrowly-drawn characters that displaced a lot of the main cast. I would have preferred more Collins family drama over the likes of Evan Handley, Timothy Shaw, Amanda Harris, and yet another Reverend Trask. I mean, some of the actors ended up playing two different characters within the 1897 arc at different points....but characters like Edward and Judith were supporting players onscreen even when their portrayers had top billing. As I mentioned elsewhere in another thread, people tune into soaps to watch favorite characters, not necessarily to see plots, so if your characters are not root-able and lack depth, the plots will not be as involving to the viewer.