This chaos is not the result of "innovation". You can innovate without making a gigantic mess of things.

This is simply poor process management.

1) The people managing the protocol repo also tend to maintain popular implementations, so the chaos keeps their competition down and they are prone to using the NIPs as the technical spec of their product.

That is an inherent malincentive of dual-market capture (the dynamic implementations and the static specifications) that should be controlled for.

2) It is not clearly defined what a NIP covers, so things keep being shoved around and rearranged. Does a NIP cover a technical topic, basic features of a particular implementation, a minimum viable implementation? Depends.

3) The NIPs change so often and dramatically, that new and smaller developers tend to focus on implementing NIP 01, so that their stuff simply works and they can at least produce one note that people can read.

But now the content of NIP 01 is being dramatically altered, without any wider discussion. That means most implementations will no longer conform or will have additional NIPs that they have to track.

4) Ain't nobody got time to read all that. KISS.