It never really worked the way it was intended, because they forgot about how sophisticated people are.
The point of VR is total immersion. But if you play any first-person shooter with any regularity, you get total immersion anyway, just using a monitor. At the time VR was at its height, I was plugged into Doom regularly. And Doom was practically a real place - realistic physics (explosions and stuff), intelligent monsters, all the rest. I couldn't count the number of times I flinched in my chair when something roared. And these days, Everquest is known as "Evercrack" because of its immersive/addictive qualities.
Then you look at the VR headset thing. First of all, it relies on you having 20/20 vision in both eyes - my experience is that if you're short-sighted then you don't get the 3D effect. So the only immersive element is to be able to look around and see stuff to shoot. But the games never came anywhere near to the realistic-ness of Doom - the physics was crap, the monsters were dumb and the graphics were hopeless. So you never got any illusion that this was a real place, total immersion just fell down, and the whole thing never got started.
You can still get VR-type headsets, but no-one uses them for gaming. Why? Because outside of their stand area they can't register movement (so turning your head does nothing), the 3-D effect isn't that effective, and most importantly they can't be produced with anything like the resolution that a monitor can. So gamers still use monitors. As arcade games go, the VR headset game was only a novelty item, like the R360 Afterburner setup, or maybe more like those shooting games that were popular in the 90s that had a plastic revolver and a screen showing video of real people shooting at you that you had to plug.
So really VR-type headsets are only useful for "head-up displays" for people who need to be able to see reference material while they're working. They're used a bit in industry for that, especially in aerospace where assembly is a complex and manpower-intensive job and getting it wrong isn't an option. There isn't really any other use for them - they're a cool technology lacking in any significant application.
Re the trickle-down effect, who says it hasn't worked? The point of VR was total immersion, and the games today show that the principle was sound, even if you don't need a fancy headset to do it. I've seen games where you really couldn't tell whether it was a game or not - car racing games being a good example, but first-person shooters aren't too far off. And there are a whole bunch of house/garden design programs that let you "walk around" what you've designed, making use of the 3D environment for productive stuff for Joe Average. But the VR headset was a red herring that never went anywhere.