I think the foot-dragging on Castle Zagyg lies at Gary's feet, and when you think about I think I understand the reason why: for 30+ years people have been building Greyhawk Castle up as "the ultimate dungeon," "Gygax's masterpiece," "the dungeon that defines the game," and so on. But that's not really what it was. In truth, Greyhawk Castle was Gary's first dungeon, created and modified on the fly as he developing the game without any of the perspective or experience he brought to his later, published, adventures (G and D series, S series, ToEE, Necropolis, etc.). Greyhawk Castle wasn't written for publication, or with any higher or more permanent goal than entertaining the members of the Lake Geneva Tactical Studies Association.
How many of you, especially those of you who have published professionally and established something of a reputation for yourselves, would want the very first dungeon you ever designed to be published, and especially to be hyped far and wide prior to its release as "the ultimate masterpiece, 35 years in the making"? I strongly suspect that, when Gary looked back at his maps and notes from the early 70s he was, frankly, a little embarrassed by them, and didn't think they held up nearly as well as his later works, which they would inevitably be judged against. He knew that if people saw his maps and notes, designed on the fly in 1972 and 73, the reaction would be "is that all there is?"
But, at the same time, the audience was clamoring for them, and had been doing so for close to 30 years (Gygax first announced that Greyhawk Castle was being prepared for publication (by Ernie Gygax and Rob Kuntz) in The Dragon in 1980, and I assume that decision was made in response to fan demand), and he knew it would be a high-profile release and a big seller, meaning more royalties for him and his family. So, what he decided to do was, essentially, pull a fast one -- not release his actual vintage maps and notes, but rather strip out the most memorable and famous elements from them and plug those into a new dungeon, designed to his current design standards in light of 35 years of experience.
The downside to that is that it required him to write, essentially from scratch, a massive dungeon of, even in its appreviated version, 20+ levels, which is something he simply wasn't up to, motivationally or, after he had his stroke, physically. Gary wasn't interested in re-writing his old material, especially so much of it -- he wanted, instead, to design new stuff -- Yggsburgh, the Upper Works, and material for Lejendary Adventure. So the project floundered and little if any progress was made on it -- Gary may have prepared an outline and drawn some new maps, but I think that was about it, at least until Jeff Talanian was hired. Note that Jeff, by his own admission, never even saw Gary's original Greyhawk Castle maps -- what he was working from was a set of maps redrawn by Davis Chenault, ostensibly based on Gary's originals. Jeff may have thought he was fleshing out the original material, but it seems more likely what he was actually doing was helping draft an entirely new dungeon containing key famous elements of the original. I grumble at that decision, it's not what I wanted to see, but it is what Gary wanted and I think I understand his reasons why.