I think it's because that architecture was less understood than the traditional OS model at the time; and they could've easily virtualised more of the hardware and gradually made passthrough not the default, eventually arriving at something like Xen and other bare-metal hypervisors that later became common.

...and as the sibling comment alludes to, MS eventually adopted that architecture somewhat with Hyper-V and the VBS feature, but now running NT inside of the hypervisor instead of protected-mode DOS.