When Hillbilly Jim debuted in the WWF, He was given a gigantic push right off the bat. He was programmed in with Hogan as his mentor etc ,given his own "family", and had a videotape from Coliseum Video produced, which was a huge thing in those days.
By mid 1986 though he was phased to almost a jobber to the stars type role where he would put over mid card heels on house shows and sometimes get a tag team or 6 man tag win on the syndicated shows with other faces that had nothing going on.
Did Vince simply lose interest in the gimmick after the bad leg injury Jim suffered just months into his run? Or did Jim just not get over the way the WWF had hoped?
Mostly the leg injury. It really derailed him and killed his momentum as a babyface. Jim was pretty much done by 88 and Vince had moved on by that point anyway.