I think it's all about more ram and virtualization. That is the early blades often had two or four DIMM slots making expansion fairly costly. Now most have at least 8 putting them on par with most previous generation 1U servers. Also with virtualization there's of course the move to more centralized storage on SAN or NAS so lack of local I/O isn't as much of an issue anymore. Most modern 1U systems now have 12-16 DIMM slots, HP and I think Sun both have half height blades that have 16 DIMMs too keeping them up to speed with their 1U counterparts. Not sure about IBM, Dell did not have more than 8 last I checked.
For me at least in the early days the memory slots was the killer for the blades, not enough so wasn't worth using them. Power usage was quite a bit less important(even now) on small scales at least(1-2 chassis).