In fact there was a short-lived project called Minnow which was supposed to put a KL-10 on a desk, but it was overtaken by VAX - much like the Jupiter super-KL-10 project, which never got past the design notes and emulation stage.
LSI-11s did end up in small boxes, so that wasn't the problem.
The problem was that Olsen didn't have a vision for commodity personal computing. And to be fair not many people did in the 70s.
He seems to have been a very 1950s corporate kind of manager, and couldn't imagine computing outside of technical and corporate settings. DEC's culture was geared to selling to corporates and academia and trying to compete with IBM, not with smaller startups. So when DEC did eventually try to make hardware that could compete with PCs they tried to sell it to their usual customers instead of finding new markets. And that... didn't work.
Apple meanwhile had worked out that you needed a national dealer network with stores and hands-on demos all over the country. And plenty of approachable PR and ad spend. That was really what made Apple stand out from the competition, and that kind of marketing, to users who didn't work in big offices, factories, and research labs, and didn't have degrees, was unimaginable at DEC.
I'm fascinated by DEC as a company. There was some incredible world-leading engineering and a progressive culture, but the vision seems to have got stuck on a peg in the 70s, kept it together in the 80s because VAX was already in place, but couldn't deal realistically with the 90s.
Gordon Bell has said that Olsen never quite understood what VLSI implied culturally and socially - never mind technically and financially.
There's an apocryphal story about someone handing Olsen one of the pre-Alpha VAX-on-a-chip designs and he has a very polite mini-meltdown when he realises that it literally outperforms the top water-cooled mainframe ECL VAX hardware - for just a few hundred dollars, instead of a couple of million.
There is a fair bit of history [1] written by the author of the SIMH emulator, Bob Supnik. The page on NVAX basically confirms your story.
The scuttlebutt in the Boston area at the time was that DEC was frantically trying to debug one or more ECL prototypes, engineers working in 3 shifts, 24 hours a day. Further, that the head designer was poached from the IBM mainframe world, and did not understand what made a PDP-10 fast.
In particular, unlike the KL-10 which had a 72 bit wide FPU, its was 36 bits wide, which after the lateness was the final straw for its viability in the marketplace. And people marveled that DEC was willing to throw away a $100 million a year business, $275 million today, supposedly a lot of dedicated PDP-10 and Decsystem-20 shops declined to move to the Vax, which they could predict would be a bad long term move.
All this is at the Nth hand rumor level, but from some people who were very interested in the architecture's fate, some with purchasing influence if not capability. It sounds like you have some better sources. The Olsen never groked VLSI tidbit is fascinating, and I suppose credible.
The thing that actually killed the KC-10 (and the KS-10 desktop successor) was the VAX, which Gordon Bell went all in on.
I, too, have difficulty understanding the killing of the pdp-10 line; what often goes unnoticed is the very high level of capability in Marlboro (vs e.g. Maynard). When I started as a co-op student, I wanted to work in Maynard with the pdp-11 folks, which I thought was the cat's meow. But wiser folks told me, "Hey, you should consider yourself special, as they are putting you in the pdp-10 group!" And of course they were right. So when DEC canceled the '20, they also -- effectively -- broke up the best / brightest concentration of computer geeks in the whole company. It's difficult to appreciate the pride the pdp-10 group took in their machines - after all, they were the machines for AI research and were the first machines on the ARPAnet. And, as anybody alive today knows, 32 bits isn't quite enough, but 36? nee 72? Ahhh... ;-)
Ken was a very bright engineer. He used his engineering skills to 'engineer' DEC, I think. I asked him if he thought DEC was competing with IBM, he said "No, we serve different markets." I wish I remembered more about that conversation that day. DEC was only 18 years old at the time.
All of their early micros were hobbled in some way to make them not-quite-compatible; the Rainbow, despite running MS-DOS, was not IBM PC compatible, and the Professional series had incompatibilities with standard PDP-11 systems. The Rainbow didn't even include a FORMAT command for formatting floppy disks; you were expected to buy preformatted ones from DEC, and using standard 5.25" floppies with hub rings was a good way to kill your floppy drive due to the RX50's mechanical design.
Probably the best shot at a home PDP-11 came via Heathkit with the H11 and H11A machines, but that was a small niche.
Even when they finally admitted to themselves that micros were the way of the future, they concentrated on the enterprise market, to the exclusion of all else. Back when the Alpha was the performance king, I would have loved to be able to have one, but the cost was well out of reach of mere mortals.
All the minicomputer makers suffered from this to greater or lesser degrees. I think their micros were so compatible with the IBM PC relative to the completely vertical silos that their minis lived in--own chips, own systems, own disks, own apps, etc.--that they just couldn't see that mostly-compatible == incompatible. Furthermore, as another comment noted, they were reluctant to even sell in computer stores much less something radical like mail order.
Life is full of these should-I-take-this-train moment.
Gordon did half the job. Told you to "do it", but didn't ensure that you had the ability to do so.
What a pity.
Linux: A Portable Operating System
The original Linux was not only extremely PC-centric, it wallowed in features available on PC's and was totally unconcerned with most portability issues other than at a user level. The original Intel 80386 architecture that Linux was written for is perhaps the example of current CISC design, and has high-level support for features other current CPU's would not even dream about implementing (see for example [CG87]). Linux did not even try to avoid using the x86 features available to those early versions — quite the opposite. Linux started out as a project to find out exactly what you could do with the CPU, and as such it used just about every feature of the CPU you could find ranging from using segments for inter-process protection to hardware assisted process switching.
However, the initial unportable approach was a case of an unportable implementation rather than an inherently unportable design. The goal of being compatible with other UNIX's resulted in a system that had portable interfaces despite the implementation details. That portable design essentially made Linux itself reasonably portable.
The first Linux that was based on a architecture different from the Intel 80386 was the port of Linux to the Motorola 680x0 family that actually got started rather early in the development of Linux. However, the original Linux/68k project was not really concerned with portability, but rather with making Linux run on 68k-based Amiga and Atari computers.
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While the Linux/68k project was in itself a huge step forward, the real portability work began when the author was offered an Alpha system by Digital in the hope of making Linux work on the new Alpha architecture. Very early it became clear that in order to be able to maintain both the stable Intel-based platform and support a new and in some respects radically different platform the kernel really needed some major re-engineering to make it fundamentally more portable. The issues and the end result is what is described in this paper.
The very first port of Linux To a different architecture was 68k, but it was really rough. Linus did then do the port over to the dec alpha as well as fix the aspects that were overly wedded to i386.
I would also argue that to a very large degree Linux’s success was driven by the rising of x86 is the dominant compute platform for server architectures. It’s universality was very much a second order effect, and the paying off of technical debt.