Colossal error vs spectacular success story. Yay hyperbole.
I'd say the actual experience is somewhere in between. Sure it enabled them to support client requests to be cross platform and proved useful for a very long time, but what was the broader opportunity cost? Did supporting this proprietary infrastructure eat up resources and prevent them from exploring other ideas? Probably.
Big projects are routinely ported once or twice to new languages. Normally, moving a project from one language to another entails a full rewrite. Because the process of building their own language had the side effect of instrumenting all their code (the transpiler was custom-designed for their application), they were able to write a program to do the port for them. That's a win I don't see captured in the original blog post, and that's all I'm pointing out.
I don't think it ate up any more resources than, say, MySQL support. Fog Creek employees have produced tons of innovation since Wasabi was introduced, including brand-new companies like Trello (2011/2014) and Stack Overflow (2008), as well as in-house products like Kiln (2008), WebPutty (2011), and Make Better Software: The Training Series (2009-ish). None of these projects were particularly resource-constrained by having to do some compiler and runtime maintenance in the process of building FogBugz.
I'd say the actual experience is somewhere in between. Sure it enabled them to support client requests to be cross platform and proved useful for a very long time, but what was the broader opportunity cost? Did supporting this proprietary infrastructure eat up resources and prevent them from exploring other ideas? Probably.