Windows 2K is a great network system but there were compatibility issues, particularly with third party devices and drivers. MS put out a Hardware Compatibility List (HCL) which users were expected to comply with. Very proprietary MS and, like Tarq57 says, angled towards people at work. There is no Media Player like there was with Windows Me, which was released about the same time, and truly exposed MS bonehead attitude to graphics (compared to Linux apps - open source - and Mac of the same vintage).
2K was MS other project developing out of OS2, a network line of OS, that remained underway at the same time as they were trying to take over the world with Win95. You could not upgrade across the lines, say from Win98SE (I think a very underrated system) to Win2K, nor could you set up dual boot between 98SE(FAT32) and 2K(NTFS) (I don't think so but I could be wrong). Most people had grown used to the user friendly interface of 3.1/95/98 line and may have been peeved at MS being so institutionally-oriented in pushing people into MS Network environment. On top of that WinME got a rep as being an out and out pig (which was unfair) and much of the ground gained with Win95 began to wilter away as MS came to be widely seen as bent on world domination, copying Mac, elbowing Netscape out of the way, and trying to take over the internet. In many ways, 2K was their Waterloo. They backed down and put out XP, which was initially able to format across the two lines (FAT32 and NTFS) and in many ways became proved one of their best efforts, further denigrating 2K and truly discarding it to Darwin's dustbin. But as Tarq57 says 2K was a very strong little system. There is much to like about it. A much more secure system than the FAT line of OS, which were starting to become infiltrated by all and sundry as people took their fury out on MS for being so arrogant and overbearing. MS are still struggling to temper the antagonism directed at them over that period, and 2K has unfairly shouldered much of the blame.
Edit - I think you can still load XP onto FAT32. I haven't tried, and I've only seen it done on the very early versions of XP (2002/3). But the option to do so has remained.