As I understand it, the designated time arrived and the canister was supposed to be open, but wasn't. A latch had failed. One or more of the payloads inside the canister started deploying themselves anyway, wrecking themselves and everything else inside the canister.

The telescope in question wasn't worth terribly much, at least compared to a Shuttle launch, which at the time cost at least $500 million, not including the cost of any payload, so even if the telescope hadn't been ruined, trying to rescue it wouldn't have made any sense.

There were some other satellites in the canister, however, and IIRC, the total value of all the satellites was nothing to sneeze at.

No, generally when a launch fails the satelite doesn't reach it's final orbit. Either part of the shroud (rocket nose fairing)( fails to release and the extra drag makes it reenter - or even if it is in a stable orbit the lack of power causes it to freeze.

A manned Shuttle service mission cost something like $500M / $1Bn (depending on how you do the accounting) so it was never really practical to retrieve a damaged satelite from a purely economic perspective.