For a long time I've concluded that nothing went wrong with the Ambassador Class.

It was just easier to keep updating and cranking out Excelsior & Miranda Class ships. So Ambassador production slowly petered out. By the time of TNG, most of them were still in service... but there were way fewer of them.

Now, the Narendra Class variant... that design was cursed.

The production reason would likely be that they had only built that one physical model, and it was used for that one-off, had to be blown up, and was never digitized. The other Enterprises got a lot more screen time probably because they had high quality models they hung onto and reused.

I honestly can't think of a good in-universe reason outside of them being maybe predominantly used for diplomatic missions more or less exclusively. We also don't really explore the gap between TMP era and TNG. I think it's a pity, because it's such a gorgeous ship. It's one of my favorite designs.

For details, see: https://memory-alpha.fandom.com/wiki/Ambassador_class

The Enterprise C was this class:

That was the Enterprise right before TNG series.

My guess, similar to warship building enhancements during WW1, which saw massive innovations/enhancements in very short order, bigger and better ships (Galaxy class) were developed in short order, and Ambassador classes weren't needed anymore.