They went into "gaming," gaming being the industry term for gambling machine. They do pachinko in Japan and slots in the USA. One of the worst things about liking old Konami and working in a casino would be walking by a series of slot machines and seeing their logo on it. Sometimes I'd just stare and do the Contra or MGS1 startup tune in my head.
Konami was always a weird, heavily bifurcated company, for as many stone cold classics they'd release, they'd release a lot of junk as well like the PS1 Contras.
Focusing on their 2000s output, there was an obvious distinction between "A games" like Metal Gear, Castlevania, Silent Hill, Zone of The Enders and Contra and "B games" like Cy Girls, Firefighter FD 18, Airforce Delta Strike and... Ephemeral Fantasia.
While the B games could have some interesting aspects (like getting a porn artist to do the character portraits for Airforce Delta Strike) the only "B game" that could maybe stand with the big boys was Rumble Roses due to it's characters getting a cameo in Metal Gear Solid 3 Subsistence's multiplayer, the rest were ignored and felt like they came from a different company entirely, it's all pretty weird looking back.
Point is, I think Konami was a company that just so happened to have some strong individual talent that happened to work for it than it was ever a great company as a whole and eventually that bubble burst as the leadership took more direct control.
On a side note I'm honestly surprised Konami hasn't revived Rumble Roses for some gacha game like they did with DOA, it's honestly surprising that ip is so forgotten by Konami.
That's really tough to say. Perhaps he might have been better off treating the series more like say Silent Hill where each installment after MGS1 weren't necessarily connected to one another. The problem, however with that is that he set up that little bit at the end of MGS1 with Solidus. Naturally, this would make you think " ok, they'll just get Snake to handle the next guy", but no. Kojima decides instead to get somebody else to do that even though Solid Snake is still in the game, and on top of that introduce this new stupid and annoying amorphous villain in the form of the Patriots. Oh also, Liquid is alive somehow, but then in MGS4 Kojima decided lol no, just kidding he ded it was Ocelot.
I forgot to mention the Ocelot phone call, was it a sequel hook or one last twist to surprise us?
I do think Kojima wrote Metal Gear Solid in a way to act as a finale while leaving just enough room for a sequel in case he chose to revisit it
one day, I think the task to suddenly make a sequel right away caught him off guard and limited for time, decided to really try to surprise everyone like no game had ever before instead of playing it safer.
Your comparison to Silent Hill is interesting, but you could also say he could have taken the Castlevania route, where there's always a vampire to slay, but it's not always the same cast of characters and isn't that kinda sorta what he tried to do with 2? Introducing Raiden, making it clear that we didn't necessarily always have to play as Snake and putting forth the idea that Metal Gear tech could fall into anyone's hands, he got cold feet with that though.
But in fact, I had hoped Phantom Pain would do for MGS what Sympathy of The Night did for Castlevania and that's really breath new life into it, but alas.
It should be said though that if 4 is what it looks like when Kojima "plays it safe" than we should be glad he decided not to do that with 2.