You are presuming the terms "never never land" and "just thrashed" refer to a crash, i.e. an abnormal termination. I read them to refer to a program that got bogged down in either unanticipated and extensive computation or abnormally slow I/O. In the context of the story the latter makes perfect sense.
What I suspect is missing from the story is something like Sussman shifting from anticipating a system problem with utilization of system resources to the realization that it was a suboptimal library routine. (That is, a problem with a solution that was the proverbial "simple matter of programming".)
Of course, in hindsight we all have perfect vision...