Hardware wasn't powerful enough because Vista was terrible. At the time of Vista's launch I had a 2yr old PC running ubuntu with compiz with full 3D effects (but more importantly generally working window composition) while adverts on TV were trying to tell me Vista had "WOW!" while it ran poorly on new machines but actually had not much in the way of wow! like visuals.

And even if many changes between vista and 7 were "cosmetic", that's how people interact with their PCs, and things like having different UI styles all over the place is a huge dealbreaker that puts people off using it. (See also: Windows 8).