I believe that 2 wire nm caught on because it was cheaper and less hassle to install. The earliest I have read nm was installed was in the 1920's.
The egc just wasn't considered important- most homes throughout the early 1900s didn't have metal cased appliances like refrigerators, freezers etc- most everything was 2 prong, for many years most of those two examples given only had a 2 wire plug. Even today, if you think about it, how much stuff in your house needs an egc?
The NEC did however a rule that went wayyyy baaack that stated something like that metal boxes within "x" distance of grounded objects (think old steel plumbing) had to be bonded- however this was not enforced a lot. The code gradually changed and started requiring grounded outlets in more and more areas. Those old rules are why you will find grounded recs and switches/light fixtures in the area around the kitchen sink, bathroom, or the porch, etc but no where else in the house.
The NEC finally started requiring all recs in a home to be grounded in the 1962 code, but that wasn't adopted in many areas right away. Another thing ec's would do is continue to use 2 wire outlets even w/ the new cable that had an egc- many ahjs only required the outlet be grounded, not of a grounding variety.