The same group made phone and Zune iirc. I'm still not even positive that was the reason the decision was made, but for some reason I remember seeing it at the top of the uservoice list forever and the decision being bandied around as such in the public sphere.
I still don't really agree regarding music management now. It's perfectly fine for me, and I have 50gbs of music on my phone. Drag and drop is simply easier for me to simply erase and replace items on the device. And I don't have to reset my phone like the iPhone because it corrupts a database due to syncing software--which I've had to do three times in less than 6 months. Yes the music app was a cluster at launch, but its far superior to ios now (imo). I haven't really used an android phone for music, so I could t really comment on it.
Overpromising and underdelivering is a problem. It seems like that Xbox music app was a dump truck for a good four months longer than it should have been. And that sync app was and still is a disaster, though I haven't used it since the first couple of months it was out. However, I don't think it was ever meant to be a Zune replacement--only a stopgap.
Again, take all of this with 100 million grains of salt and as the opinion of a duder only tangentially touching those areas.