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So why did this potential rebel killer never see the light of day?

Short answer: money and resources.

Long answer: the initial design was powerful - VERY powerful. In fact, it was TOO powerful for the imperial Navy. They just wanted a cheap escort frigate for their convoys which could be produced in the tens of thousands (most likely even more!), not a potential system monitor that could also double up as an escort or even perform orbital bombardments if needed. As a result, they rejected this version, forcing Kuat to go back to the drawing board.

The designers were forced to strip the ship from everything that wasn't absolutely needed for the role of a simple convoy escort: they removed most of the armor (except for the most vulnerable areas), threw out almost half of the armament, and ditched the pressurized launch racks, forcing the TIE pilots to enter their fighters in the vacuum of space instead in a pressurized (and somewhat delicate and expensive) hangar. When they were done the imperial brass gladlyaccepted the now much cheaper version that was also a lot easier to produce, but it looked more like a skelleton of a ship somebody stole from a boneyard and less like a still extremely powerful escort frigate.

Description

So why did this potential rebel killer never see the light of day?

Short answer: money and resources.

Long answer: the initial design was powerful - VERY powerful. In fact, it was TOO powerful for the imperial Navy. They just wanted a cheap escort frigate for their convoys which could be produced in the tens of thousands (most likely even more!), not a potential system monitor that could also double up as an escort or even perform orbital bombardments if needed. As a result, they rejected this version, forcing Kuat to go back to the drawing board.

The designers were forced to strip the ship from everything that wasn't absolutely needed for the role of a simple convoy escort: they removed most of the armor (except for the most vulnerable areas), threw out almost half of the armament, and ditched the pressurized launch racks, forcing the TIE pilots to enter their fighters in the vacuum of space instead in a pressurized (and somewhat delicate and expensive) hangar. When they were done the imperial brass gladlyaccepted the now much cheaper version that was also a lot easier to produce, but it looked more like a skelleton of a ship somebody stole from a boneyard and less like a still extremely powerful escort frigate.