I think shell interactivity improved because everyone just decided xterm was the way to go, which itself was based on VT-102 with some later VT 200/300/400 bits

I think shell interactivity improved because everyone just decided xterm was the way to go, which itself was based on VT-102 with some later VT 200/300/400 bits and new inventions added on. Today it's so common (the default on Linux and macOS terminal emulators) you'd be a bit bananas to use anything else. Sometimes something is so painful everyone unconsciously decides choice is bad and we're all going to use $X.