Plus the behavioral differences between email and instant message didn't blend well: was I going to wait in a mixed email/instant message conversation for a response, or was I going to move on to the other conversations in my inbox and send a reply or archive each so that I could move on to doing other things? And if I wanted to temporarily leave an instant-message-like conversation so that I could deal with some more email-like conversations, would the person I was chatting with know whether or not I would return?
Eventually I stepped back to look at what additional value a user gained by blurring instant message and email in this way. Fundamentally they're both asynchronous text-based communication, and the things you can actually do with them aren't strikingly different. The biggest difference is in the expectations that a user has for each.
Anyway I still wanted to "innovate in the email space", so I decided to go a more extreme route, and I made my own pull-based protocol (superficial similarities to IM2000 - http://cr.yp.to/im2000.html) that retains backwards compatibility with email while adding abilities like stateful plugins (JavaScript apps/widgets) that can share data through the new protocol, editing messages after they're sent (SMTP recipients receive the new version after the update), and inline replies to parts of messages to enable nested conversations. If you're interested, I posted it earlier this afternoon here (https://news.ycombinator.com/item?id=10693535).