I don't think the library is all that bad TBH. I think ultimately what hurt it, other than the reports of how cheap and shoddily put together it was, was the fact that the games simply aren't hard to find, and people have been playing them off of emulators and the PSN for years. Why spend $100+ on a separate system to play these games that you can grab for $5 or $10 a piece on PSN?
Playstation also doesn't carry the same nostalgic weight as Nintendo, and has been sure to allow you to play all or most of it's games on each new system, whether it was BC or digital. I mean, you can still play PS1 discs on a PS3. If you have these games in one form or another, there is really no incentive to pick up the PSC. These arguments could be made for Nintendo as well, with the VC letting you download classics, but I think Nintendo platforms have a more unique feel about them, and I don't think people have kept up with the old library of games, as much as people have with the Playstation, because online and digital content for Nintendo has been kind of shit and has never been a focal point of their consoles. I think the VC is more of an afterthought for Nintendo console owners. The PSN on the other hand, seems more like a staple of the Playstation experience, where people have routinely re-upped their classic library while browsing around for other games.