Very simply, they do NOT want on-chain scaling. In their own words, "segwit IS a compromise". We can only interpret that to mean a compromise between sensible scaling and NO on-chain scaling, which is in fact what they secretly want!
They want Bitcoin to be a settlement network, but do not have the honesty to admit this. They cannot honestly and openly admit "yes we want to change Bitcoin from Satoshi's peer to peer cash into a settlement network" because it would be so radical that it would have a high probability of getting backlash from the community. Therefore, they have opted to be sneaky about it.
Because they want bitcoin to be a settlement network, the impasse is fine with them, perhaps even better than segwit.
Segwit represents a tiny amount of on-chain scaling designed to make it APPEAR that Core is willing to offer on-chain scaling, yet designed in a way that it will not even activate (95% consensus), and even if it does, it would be years later than appropriate.
Segwit IS their compromise. Ideally, for them, no on chain scaling occurs.
To summarize: There is no need to compromise further because no change works in their favor.
Sweet Jesus the replies are long on this one. I see this is a passionate topic, I'll keep it short and sweet.
It's obviously political at this point. Members are all heavily invested in btc, and decisions made about the protocol tend to preserve the wealth /interest of the board, not the populace. It's money, folks, and cronyism/greed is slowing down the innovation worse than regulation.