Bil Herd provided his explanation of this issue at the 2015 CommVex. Basically he indicated that the marketing department were too fast in releasing the specs for the C128 and then the engineering dept. had to come up with a solution, hence the REU.
By the way it was a fantastic presentation by Bil, joined by Leonard Tramiel and subsequent Q&A session(s). Looking forward to see the videos that Robert made.
The solution of trying to running in multiple machine to me is secondary. If you have an OS that runs on a stock C128 the additional hardware configurations will have to be handled by specific drivers or add-on pieces. DOSSHELL was differnet from GEOS in the sense that it would let you run any applications written for the PC outside its own shell. Not all PRG applications coul run under GEOS, particularly the one that made use of the kernel, since GEOS took over that to run its own internals. GEOS provided word-processors, spreadsheet etc, to run within its own enviroment. DOSSHELL allowed you to run any other (not Windows) based applications, programs, games.