It appears to me that S-HTTP is more flexible and does not require a separate IP or port to serve the correct certificate because S-HTTP is able to utilize the Host header. Was IP space a concern at that time?
I can see the argument that HTTPS encrypted more of the connection data than S-HTTP, but I don't see much of the point if you can just as easily tell which website the user accessed because there's only one site per IP (most of the time) and the certificate usually says what domain anyways.
My Answer: SSL created in 1993/1994 by Netscape and HTTPS was naturally added on to it around the same time in 1994. The original goal of HTTPS being to retrofit existing protocols into security without any changes. S-HTTP didn't come along until 1999 and required HTTP 1.1 so by then HTTPS was so entrenched there was little benefit to implement S-HTTP. Thanks everyone.