I think the problem was that the independent talent pool started to dry up in the late 90's and it was becoming more difficult to replace departing ECW "stars" with equal or close to talented wrestlers and that's why he went back to Raven and Sandman instead of building up new talent.
In that WWE.com article they did about the plans for ECW if it survived, it sounded like the plan was to transition the company into a similar style to what wound up being ROH since Paul thought the hardcore style was dead. I think Heyman even name dropped some of the guys that went on to work for ROH during its infancy. I don't know how true that is, but if ECW had survived another two years, it'd have been interesting.