They had/have the best ARPG on the market, they should have recognised that and valued it, and brought POE1 up to date. Someone earlier mentioned the difficulty of pleasing everyone, and exactly what they shouldn't be trying to do, you can't capture the entire genre audience and also broaden the player base exponentially which I'm sure was the goal with POE2. There are loads of examples of studios diluting their own product away from it's core fanbase to appeal to a broader spectrum and it almost always ends up in failure, and with an alientated core audience, this is true in TV and movies too.
They could just have modernised POE1, graphically etc, and then had themselves the best ARPG on the market, only better, within a modernised framework set for the next decade, so POE2 not POE2 a different game, alongside POE1.
That was the original plan for POE2, somewhat. New campaign, same end game, updated graphics and some QOL features.
At some point scope creep happened and they decided they wanted to split the game off and make it stand alone.
I am not against that idea to be honest. The ARPG market is quite large and when they get into the swing of things we will have 6 leagues a year to play. 3 POE and 3 POE2 leagues and both games have a different feel to them so some people will only like 1 and others will only like 2.