You are right in that it was way ahead of its competitors (mainly Netscape) when it launched. It had more features, much better performance, and it looked great in comparison.

But it also had an insanely huge amount of bugs, half-broken features and “I’ll just do it my way” stuff. This was also true already at launch.

Sure, if Microsoft had replaced it in 2003 or 2004, nobody would have such “fond” memories of it even today. But the bad reputation does not come only from the fact that it was not updated for a long time; it also comes from its many problems and issues.