This is one issue, another issue is that the method used to implement 16-bit compatibility in 32b windows involves virtual 8086 mode and running instance of DOS

This is one issue, another issue is that the method used to implement 16-bit compatibility in 32b windows involves virtual 8086 mode and running instance of DOS inside of that even for native 16b windows applications. In all, I assume that it was droped mostly because it involved too much work for somewhat questionable benefit.