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I've always wondered about the scale of the 959, I've always thought a chassis modified from the Hotshot/Bigpig line with a 1/8th scale shell would have given it some genuine offroad ability.

There's probably some logical explanation though ... like the blow-moulding technology they had couldn't cope with a bigger shell, or maybe some Tamiya executive decided at the start of the project that he wanted one on his desk, and said 1/10 was too big

I reckon they were trying to start a new type of racing - there's 1/12 on-road, stocks & bangers, but nothing off-road (Or rather, Rally). Kinda like the opposite scenario with 1/10 on-road/track Group C cars.
Shells shouldn't have been a problem, they did Quattro, ascona & Lancia before the 959.
Maybe they were feeling threatened by Nikko's offerings!