If you look at that time, there are two main reasons why this genre became “extinct”, and in many ways it is in line with some other genres such as CRPGs like Baldurs Gate and so on.

1: Graphics aren’t that exciting anymore: They were all pretty much isometric games, and there was definitely a minor graphical revolution at the time, which meant those games weren’t respected. This idea is now outdated, and there is no continuing desire to make every game a cutscene.
2: Difficulty level: The games were difficult, not easy to get into, and therefore not attractive to a large audience. A game that was *too difficult* or too complex was no longer considered attractive, especially in terms of quality of life, this generation was still very young. By 2023, there will be more quality games, but also a larger pool of players who find challenging games attractive.
3: Console Push: The PS1/N64 generation was still young, but the PS2/Xbox generation was the first generation to grow in popularity and usage. Games like this didn’t work well (or at all) with consoles, so they were relegated to easier games.
4: Simplification: ICM #3, look at Baldurs Gate vs. Baldur’s Gate. Dragon Age: Origins. Games had to become easier to play, in order to attract more people and also make it easier to play on consoles. Now all of that has been abandoned, and there’s a recognition that you don’t have to port every game to the console, or later.

Finally, I must say that the games themselves were not innovative enough. Desperados/Robin Hood/Commandos 2, all games that play pretty much the same way, with only the sauce being different. So the market eventually got tired of this type. And in the case of Commando, for example, you also had the crazy idea to make a third-person shooter, and it worked.