I think we forget another very simple reason: KaZaA is easier to use.
Searching for an artist and limiting to 196kbit/s can be implemented as an UI-feature. Phex has filter-options for that (
http://phex.kouk.de , or look in these forums), Acquisition allows you to set a minimum bitrate, but no maximum.
I think, a better UI would give LimeWire far more Users. Look at Acquisition on the Mac, it nearly has the monopoly in p2p here (aside from acqlite and some phex users).
Network performance isn't everything (though it is important).