Why hasn't John Hiatt really attained commercial success as a singer?

I think at least part of it is that he writes somewhat intelligent songs that, while excellent, aren't really what people expect, or have odd analogies or turn of phrase in them that require some thought.

If you consider some of his more popular songs (either sung by him or different artists), they tend to be the fairly straightforward ones. But a lot of his songs aren't like this and, as a result, don't get a lot of radio play I imagine. Then, you get a bit of a cycle where more popular musicians sing his stuff because they're known and he's not, but because the song is being played, the popular version gets the radio time and there's no need for his version to be played, so his popular songs are always being played by other artists, the odder songs aren't being played at all, and there's no need to turn to the Hiatt version since there's a more popular one available.

I also suspect some of his more recent turns into blues and more folky styles are even less radio friendly, although I personally love them just as much.

I think it is his style, in between rock, blues and country - he doesn't really fit into one genre so his fans and airplay are spread too thin.
He has a decent fan following maybe his fans are all the type that march to their own beat and don't go mainstream, his sound is unique and that's what is so great about him.

I think his voice can be an aquired taste. Also he slips in and out of different musical genres. He does't get exposure from music videos and his main exposure comes from occasionally being on PBS TV shows (which in my area air after midnight) or airplay on public radio.

I own every CD he's released (including White Duck and Little Village) and also several bookleg live CD's. The bootlegs are great because you get to hear him talk between songs.