The timing was more of an issue than viewer fatigue. If they had expanded to 90 minutes a few years earlier, when the show was basically tied for #1 in the ratings with Days, it might have been worth all that extra work. But in 1979, GH was taking off and shows like AW were losing favor (and ratings). It was a situation where viewers left to see something different, but the response from the network was to provide even more of what those viewers didn't want.
The biggest issue, though, was logistical--there was simply no way to run a 90-minute soap at all, much less run it with the level of quality that AW had in that era.
Harding Lemay did a better job than most when it came to giving his characters lengthy, meaty scenes that "had a point" and meaningful stories--it was why he wanted the hour-long format. But to achieve 90 minutes, the writing teams had to invent several new characters (entire families) just to fill up time--not because Lemay, King, and the other writers felt the show needed more families and storylines. NBC seemed to think that it would just be 30 more minutes of Rachel, Mac, and Iris. In fact, the longer format meant the viewers saw less of their three top stars, since they had to fill up so much more screen time with other characters and working those three actors to death would have gotten them arrested. I can't recall the exact way it was juggled, but the viewer would see only Mac twice per week, perhaps only with Rachel or only with Iris (rarely both), and all three were being used with a lot more of the newbies onscreen rather than the viewer-favorite Mac/Iris/Rachel conflicts. Their contractual guarantees did not allow the writers to put them together onscreen as much. So the bigger episodes had a lot more filler, and very little of it was what the viewers wanted. Lemay was basically phoning it in by that point and left, with his underlings not able to do it any better.
I give them points for the decision to create Texas for McKinsey, allowing AW to revert to 60 minutes. I think Lemay and Rauch should have sought a "sister-show" format rather than expanding AW in the first place, rather than having one soap covering the whole 90 minutes that way. I think it might have been successful if they had planned it to be a temporary "event," a really juicy umbrella story that they could claim was so big that "60 minutes could not contain it!". For two months or so they could expand for 90 minutes, and once the story played out they would go back to the usual 60 minutes. If viewers got exhausted by 90 minutes every day, then the story obviously wasn't as good as they thought! But if viewers liked it, they could do it for Sweeps events or something when NBC cancelled a game show or another soap and had a half-hour free.
AW never did recover from the 90-minute experiment, though an argument could be made that AW would have dropped off in the ratings even if it had stayed 60 minutes, since GH (and later GL) was becoming so popular.