Something I've been unable to figure out: what is the trick you have to invent to make wood pulp paper? Is it chemical, or do you just need to keep smashing at wood chips in water?
You need to break down the lignin without damaging the cellulose. Boiling and mashing doesnt do this very well, you still get bundles of fibres sticking together, you really need them all to separate. The bonds holding lignins together are slightly different between grasses and wood. For grasses sodium carbonate or hydroxide dissolves the lignin pretty well (i havnt tried but you could probably get away with wood ash and some salt for this, to provide sodium and high ph), and allows you to make some pretty nice paper. This as far as i know includes things like papyrus, sugarcane etc. Wood is different, you need sodium hydroxide and sodium sulfate to dissolve the lignin. This contributes to the smell of the paper making process where wood is used. I dont think the ancients knew about the use of sulfates, so their papers were mostly made of grasses or leather (vellum).
Wood pulp is extremely tough. Why use water power to pulp wood for a very long time when you can use it to pulp rags for a much shorter time to get the same amount of product?
Water power is limited. Consequently, you have to make choices as to what you are going to use it for. At that point economics kick in.
Until your demand for paper significantly exceeds supply, you won't start looking for a better process. And then it took until the steam engine until such a process became economical.
You have to prove that wood pulp works well enough before anybody will invest in the chemistry research. Proving that wood pulp works effectively for paper requires the steam engine.
Technological advance almost always consists of many incremental steps that have to come together simultaneously.
Generally, the limitation was economic--if there was enough money at stake humans are clever enough that they will find a way.
