Why don't commercial metal detectors clearly distinguish between iron and other metals?
If you could answer why pulse induction does not discriminate (from
  technical perspective) that would basically be answer to my question.


A pulse induction metal detector uses a single coil and a transmit/receive switch to connect said coil to either a transmit pulse or a receive amplifier. In some  respects it’s like radar.

What you get coming back from a metal or conductive target is a kind of reflection and that reflected signal doesn’t carry much in the way of phase information that would otherwise be used to discriminate between ferrous or non ferrous metals.

Another type of detector is called “inductive balance” and it usually uses one transmit coil and two receive coils wound antiphase. When there is nothing to detect, the signals in the receive coils cancel to zero but, because the transmit coil is (usually) a constant sine wave, you can glean phase information from the signal and decide if the phase change corresponds to ferrous or non ferrous metal. There are other variants that offset the balance of the receive coils and apply a threshold detector for discrimination AND another variant pulse the transmit coil but, because it is resonant tuned, the resulting sine wave can Also be used in a phase discrimination circuit to differentiate ferrous and non ferrous metal.

The simplest detector is the BFO type. It stands for best frequency oscillator and uses one coil that is frequency shifted higher or lower in the presence of metal. A high shift represents a reduction in coil inductance due to non ferrous metal being present and vice versa for ferrous.

Regards sensitivity in good ground conditions, the pulse induction is best and is often used by gold diggers in the dry soil or sand in Australia. But, it’s easily swamped by mineralisation in the ground whereas the inductive balance would win because has the best chance of discriminating against this type of terrain.