90210 did miserably in the first part of the season, but Fox stuck to it since they had just cancelled all their dramas the previous season. It started gaining numbers towards the end of the first season, which is why the summer season happened. They saw it gathering momentum so wisely took it.
As for why they didn't do year round? Both it and Melrose did 30-34 episodes per year. It was hard enough to get the cast to commit to that and I'd assume they hadn't signed up to do a year round soap, which would be the issue.
With that said, considering the success of Peyton Place I've always been surprised that no one tried a similar format after that ended. Simon Cowell tried to adapt one of the UK soaps for Fox and it was meant to air as an half hour (presumably post-Idol as it was 90 minutes) and even filmed a pilot. But that's as close as they got.
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