I'd be hard to work with if I was demoted that much, too, though.
I don't necessarily think the initial retirement to try and have kids hurt him however failing to have kids and getting divorced probably did. Like I can see Vince seeing that as a total failure and stars don't fail, pal. Savage wouldn't have gotten the second title run if it was critically damaging. I think Warrior flaking might've hurt him to an extent as well, now that I think about it, like I can see some logic in seeing Savage not drawing as well with his two most notable rivals and peers being gone (one under very negative circumstances) not to mention Liz leaving and derailing the major aspect of his character and feuds.
And, as always, the Slim Jim deal alone should've meant a steady push anyway. I still think Savage likely told Vince he was coming back in 1996 for leverage and Vince was a sucker because the Slim Jim deal would've been huge for the WWF at the time, Vince felt betrayed by someone he really did have some loyalty to, so that's why he got blackballed.
