In the UK, people were building off-road bikes with 700c in the 1970's. This was more a branch of the Rough-Stuff Fellowship, than Cyclo-Cross racing.
Probaly the main reason they didnt take off is that sunny California has more marketing appeal than damp muddy Wales.

Do you have any links or info on the 29" wheel bikes. Are they a new wheel size, or some variant of 700c ?