Exploring the web tonight I ran across this GREAT Mobile XHTML overview which explains the history behind the move from WML 1.0 and cHTML to XHTML/WAP very concisely:
... NTT DoCoMo and the WAP Forum joined forces to create the next standard for wireless internet access. They wanted to combine the features of WML, XHTML Basic, and iMode to create a platform that would serve all their users and developers.
They started with XHTML Basic to accelerate the convergence of wireless and desktop internet development. With this, they got CSS.
They added in the functions from cHTML and WML that were not in XHTML Basic (but were in XHTML): acronym, address, br, b, big, hr, i, small, dl, fieldset, optgroup. The resulting language is a superset of XHTML Basic, but a subset of XHTML. They called this language XHTML Mobile Profile.
They then added the features of WML that could not be found in XHTML. These included navigation aids, onenter events, contexts, and other features (both elements and attributes). In true XML fashion, these were placed in an XML namespace and could be used by putting "wml:" in front of the command. The combined XHTML Mobile Profile plus WML namespace is WML2.
This (to the usability folks, at least) was the best possible solution. CSS gave control over fonts and layout. We could control cache, assist navigation, and have multiple non-link commands on a page using the WML namespace. We were happy.
Enter politics. The wrong person made an off-the-cuff remark in front of the wrong people, and some of the Alliance members who wanted the mobile web to be just like the desktop web took the comment to heart. The Open Mobile Alliance, led by Nokia and NTT DoCoMo, determined that the WML namespace was "just for backward compatibility." Once this decision was made, the one to make the WML namespace optional quickly followed.
The Open Mobile Alliance decided that since the WML features were for backward compatibility, then a device could be WML2 compliant either if it read WML2, or if it read XHTML Mobile Profile pages and WML 1.x decks. There was no need to be able to read WML tags in the XHTML document.