So what happened to Episciences?
Traditional, subscription-based publishing, with self-archival of pre-prints, works well. 

That is probably the major reason why other models stay confidential, or are plagued with dishonest behavior (like author-pay, "gold" OA).

The other aspect is that such initiatives are typically pet projects driven by a few enthusiastic individuals. Sometimes their institution tells them to do what they are actually paid for. And when they leave their institution, stop their academic career for a reason or another, or retire, there is no real incentive to find someone to take over.



Side note:


  Of course, this reduction of editorial (and other) overhead takes the
  wind out of the sails of the "who is going to pay for it" argument.


Not really. In the "green" OA model, somebody is obviously paying for archival. It might be invisible to most authors, but institutions have to decide to allocate a portion of their budget to maintain these databases. As for formatting, it's payed via the salary of researchers who spend time on such a task instead of on research and teaching. Highly educated scientists having to worry about font size, picture format, placement of floating objects and 'overfull hboxes'... The cost of knowledge, indeed.