The issues that can emerge from this system are well-known. 4e adresses them through treating the encounter as the site of action resolution, and establishing mechanical parity of builds about the encounter.
IDK about the encounter as the unit of balance. "D&D Gamma World" actually was designed that way, long rests meant virtually nothing, it was all encounter-based - and it was quite different from 4e (no surges, for instance, the only 'daily' most likely a typo).
4e characters have rough parity whether in an encounter or in several or many per day. But, multi-encounter days /are/ harder on all of them than single-encounter days, and a single encounter that's 'nova'd (the party just unloads dailies & action points on it unreservedly) will be much easier than the same one at the end of a long day with few such resources remaining. So the game was designed around a day, especially as far as PC:Monster 'balance'/encounter difficulty is concerned, and the PC classes & other options were designed to be balanced regardless of day length.
Whereas default 4e will push back very hard against an attempt to run itoin the mid-80s and on AD&D spirit.
4e worked best 'above board,' while the classic AD&D worked best with a DM screen ('illusionism,' even). But you can take 4e behind the screen and run it like the classic game, even to the point of using skill challenges, you just don't explain the challenge like you would in 4e, you let em feel their war through, like you were just improvising around a lack of any such structure.
I've run Temple of the Frog in Essentials, and reprised a setting/scenario lifted from my old 1e AD&D campaign in 4e. I did not feel a lot of push-back. Essentials seemed positively enthused about it, if I may anthropomorphize the system a bit.
I suspect this isn't true from WotC's point of view: they made plenty of money from it! (Enough to fund the development and production of 5e.)
Plenty of money is relative. It seems likely that a lot of money went into developing 4e, which didn't do much 'retreading' of past material, and which had a very rapid pace of release the first two years, and was developed concurrently with the last batch of 3e products, and had digital tools being developed, too.
That wasn't money it was making as it went, that was an investment by Hasbro, and according to insider claims the expected return was 50-100 mil a year. 10 years later, in the grip of a boardgaming resurgence and the come-back of the D&D fad of the 80s, the whole TTRPG market isn't 50 mil - even adjusted for inflation, I doubt TSR was pulling that down in the 80s.
So whatever 4e was making, even if DDI was cannibalizing book sales, it was not plenty from the POV of having promised so much.
I've got not idea what that percentage was, but clearly it was sufficient to fund the development and hosting of DDI, as well as the production of 30+ hardbacks. So it seems to have been non-negligible.
Most of that was probably sunk costs, even if they were recovered, the goals weren't met - for a moment, there, D&Ds future if demoted to 'non-core brand' status was in doubt, then Hasbro dropped the whole core brand thing, and it was once again OK to manage a property with investment & expectations consistent with past performance, without fear of being shelved.
Just a point, no horse in this race, but, no, that's not true. D&D fell behind Vampire the Masquerade for a couple of years back in the 90's. .
I'm not aware of either TSR or WWGS sharing sales data back then, but Storyteller was certainly the TTRPG head-space leader through most of the 90s, whatever the relative sales.
Though, of course, there was a interegnum between TSR/2e and WotC/3e, at the end of the 90s.
Whatever form(s) of leadership WWGS had in th 90s, WotC recovered them with 3.0 & open source d20.
