It would take quite a long post to hit all the problems with skill challenges as they were implemented in the 4e PH1, but I want to focus on one in particular: using skill check failures to track the loss mechanic.
A "three failures and you lose" mechanic is alright for certain types of skill challenges. For example, if the party is trying to persuade someone touchy, maybe the touchy NPC will walk away if the PCs fail to make progress three times?
But it's a terrible dynamic. Because it's important to minimize the chance of failure, it discourages anyone but the most capable people from attempting a roll. In the combat rules, some characters may be more helpful than others, but the penalty of failure is a failure to make progress, not losing a third of the party's ability to survive the encounter. Discouraging weak assistance just makes the SC less fun because a well organized party will get most of the players to "shut up and assist" rather than think creatively or have fun.
(And yes, there are ways of getting around this, but you don't design an encounter mechanic that requires any designer to work around a core characteristic of the mechanic!)
In addition to creating a poor party dynamic, "three failures and you lose" often doesn't make any sense. If you're putting out a fire, what matters is the fighter knocking over the water tower, the bard arranging a bucket brigade or the wizard casting wall of ice. Why should these characters' efforts be undermined if the frustrated player of the gnome rogue decides to blow his action peeing on the flames? If the party is searching for arcane lore, what matters is what the intelligent characters know or can find in the library. If the barbarian decides to have a scene making a comic attempt at the dewey-decimal system, that shouldn't cost the party a failure. It's just a non-success. (Yes, a good DM won't penalize players for this, but that's just another example of working around the rules.) Even in the touchy duke scenario, someone trying to get a success with a long-odds history roll should have the option of keeping his mouth shut if he doesn't roll well.
Frankly, the one thing I've noticed about good skill challenges is that they usually replace the "three failures and you lose" mechanic with a mechanic that makes sense for the encounter. For example, a Caradhras Pass style skill challenge could involve forcing everyone to make regular Endurance checks to avoid losing hit points (or healing surges), while allowing the characters with appropriate wilderness skills to make rolls to adjust the Endurance DC. I'm not even sure what "three failures and you lose" would mean in a skill challenge like that. ENWorld is filled with clever people, so I'm sure someone can explain a plausible way to read it, but that's the problem: we shouldn't need "clever plausible reads." The mechanics should be close enough to the in-game fiction that the meaning of the mechanical outcomes are obvious.
As far as I can tell, the only nice thing about "three failures and you lose" is that it's simple. All I have to say is this: throwing a rock at your players if they roll below 5 on a d20 is also a simple rule. That doesn't make it good rule.
-KS