You're right, it never caught on, but a few years ago I read a statement by Knuth that said he still writes code that way. Today, about half of the time my Emacs configuration is written in org-mode babel[1] which supports literate programming. In fact, this a common example of literate programming that I see on the internet along with Jupyter Python[2] notebooks widely used by scientists.
Although literate programming seems to work okay for Emacs configurations (often reaching over a thousand lines of code), I've never felt like the approach helped me enough to employ in other programs.
Jupyter was inspired by Wolfram Notebooks, which uses "literate programming" as a term directly in their marketing materials. https://www.wolfram.com/notebooks/