Wave failed for basic marketing reasons. Essentially, it was impossible to explain Google's vision of Wave in an elevator.
If, instead, they had marketed as "21st century email", it would have had a better chance (it still has).
Also, they built an impressive platform that allowed essentially anything... and forgot to put in the basics (for example, an integrated, easy to use version of a mailing list)
Marketing essentially to Google geeks only didn't help either. Did you see any promotion of Wave in Google sites? (like the one for Chrome in the hompage when using IE)
Also, account type proliferation is BAD. I already have enough trouble explaining to people that they don't need a _Gmail_ account to use Google services, just a _Google_ account.
Now we had these addresses that _looked like_ emails, but weren't. And you still required a google account to get one.
In a nutshell, Google should have done what it did with Gmail: do one thing and do it right. Solve a pain point.
Only AFTER that has taken off, reveal the whole amazing plataform that powers it.