Before the Space Shuttle retirement, there was a huge pressure on NASA, U.S. Administration, and everyone else directly involved in U.S. human space exploration using Heavy-Lift Launch Vehicle (HLLV) to come with suggestions to keep the U.S. access to space and International Space Station (ISS) gap-free and all the existing workforce employed in the industry, doing what they do best, while trying to reuse existing technology to achieve these goals.
Advisory committee was formed by the President G. W. Bush, Vice President J. D. Quayle and the Space Council, chaired by Norman R. Augustine, more commonly know as the Augustine Commission. Commission's end report included several proposed variants for the continuation for U.S. manned flight, among which Option 4B that called for a direct Space Shuttle derived HLLV reusing many parts of Space Shuttle, like it's two boosters, external tank, Space Shuttle Main Engines (SSME), and sitting Orion crew module on top of it, dealing away with the Space Shuttle Orbiter (SSO). The whole idea enjoyed large support of the space community, as can be seen for example in this video compilation supporting Augustine Commission Report Option 4B.
Exploded diagram of the DIRECT v3 Jupiter-130 Launch Vehicle. Artist: Philip Metschan, DIRECT Team. Source: Wikipedia on DIRECT
From Review of U.S. Human Spaceflight Plans Committee document titled SEEKING A HUMAN SPACEFLIGHT PROGRAM WORTHY OF A GREAT NATION (PDF), Option 4B, perhaps better known as DIRECT v3, is described as:
Variant 4B is the Shuttle extension variant. It offers the only foreseeable way to eliminate the gap in U.S. human-launch capability: by extending the Shuttle to 2015 at a minimum safe-flight rate. It also takes advantage of synergy with the Shuttle by developing a heavy-lift vehicle that is more directly Shuttle-derived than the Ares family of vehicles.
I can't state how much this option makes sense to me, but as much as I'd like it to, the whole thing isn't happening, is it? And the then so much discussed U.S. human access to space and workforce gap is now a reality, isn't it? So, I guess this naturally begs the question:
What eventually killed the Augustine Commission Report Option 4B, Directly Shuttle-Derived Heavy-Lift Launch Vehicle? Are there any good objective reasons that made decision makers believe it was worth scrubbing much of the existing Space Shuttle technology for a new U.S. HLLV in the form of first Ares, then SLS, that even now seems more as a gap-filler project that won't deliver for many years to come, even if all goes according to plans?
I do apologize if this seems as a bit of a rant, I guess it is, but I'm looking for objective explanation of what went wrong, and if possible, please substantiate your claims with references. Which decisions made U.S. lose its status as the world leader in human space exploration and caused this almost intolerable gap in U.S. based human spaceflight and access to space for manned missions?