The AMD system architecture is a legacy design going back to the first K8s. Their cache architecture is what they can design in the process technology available to them. The two-fer of two 8 core chips in one package with the disadvantages of that (as the paper said they are already taking the hit from being a two way system in a single package) is the result of chronically not being able to design a decent follow-on to the K8 core.
I don't think it is an issue of erroneously thinking this was the right way to go but rather doing the best they could with what they had available to them. It's hard to compete against someone who is at the top of their game and has higher R&D spending than you have total revenue. :-O