It is was larger and still only competed with the leftovers (HD5830).
It also competed quite well with the 5850, and it wasn't exactly 'miles behind'. Die size, performance and power consumption well all quite close, especially with the 1 GB model. This, combined with very friendly pricing, made it very competitive.
Perhaps you need a refresher: http://www.anandtech.com/show/3809/nvidias-geforce-gtx-460-the-200-king
Supply problems correct. The smoothness lies in a huge increase in marketshare and a launching full range from top to bottom in three months.
Huge increase in marketshare and supply problems at the same time?
Not really. The marketshare increase didn't happen at launchtime, but mostly many months later, when the launch problems were finally ironed out.