IMHO the biggest obstacle was a proposed basketball stadium for the railyards, in concert with a large downtown/infill development project. The remediation work and transfer of land ownership from UP slowed down the whole overall project, such that the window of opportunity was completely missed with a successful basketball team and a booming real estate market. Both of those things are gone and companies have gone to the poorhouse in the meantime. There were many what-ifs and what-wheres, and maneuverings to make an advantage or trade-off. The public gain from the land development was to be the RR Technology Museum, but it began to play second fiddle to other interests. Perhaps a return of focus to the railroad museum versus and more public control of developable property could actually make the museum happen with the envisioned public-private partnership, rather than be a lot of talk.
Over the past decade there were a number of interesting side-show plans in to the overall scheme of improvements. This included putting the downtown freeway (I-5) completely underground, making the lead tracks to the SP shops facility a grassy park (effectively isolating the facility), moving the huge brick and mortar depot building 400 feet north to the future UP mainline alignment (and freeing up valuable developer land in the downtown area), giving up a wing of one the main locomotive shop buildings to a developer for retail development, and giving up smaller buildings for the developer for retail development (upholstery, bathhouse, paint shops etc). Most of these ideas are gone with the wind but I think the UP realignment and the designation of old buildings (outside of the boiler shop and erecting shop) for other use are still in the works.
One of those smaller buildings had provision for three rail tracks with arched doorways. It would be nice to keep that one in the technology museum site, and perhaps one or two other miscellaneous buildings in addition. I know that leaders have made concessions otherwise, but perhaps this can still change. The project has been very fluid over the years, and a few large steam locomotives have been sitting outdoors the whole time. I bet the additional display/storage/restoration space would be useful.
Some references to consider:
http://www.trainweb.com/travelogues/rayburns/2001j06a.html
http://www.cityofsacramento.org/transportation/director/sitf/documents/TR9_Sec4-94e.pdf
http://www.trainorders.com/discussion/read.php?10,2059523
http://www.dot.ca.gov/hq/transprog/ctcbooks/2011/0511/048_2.1a3_RR_TechMuseum.pdf
http://www.cityofsacramento.org/transportation/director/sitf/documents/TR11_Sec3-12.pdf