I think this was first written about at length in the book ‘Soft Machines’, which is a really good critique of some of the nanotechnology thinking at the time. I highly recommend the book.
Because of Richard Smalley that money went towards material science and chemical research instead of the molecular manufacturing it was promised for. Even though, as you point out, in terms of fact the critique only applied to life-like bionanotechnology.
The history of this is laid out pretty well—with a surprisingly minimal amount of sour grapes—in Drexler‘s book Radical Abundance.