Here's what I've pieced together.
Angle was hurt, but was basically shooting. Assuming he'd mow through the guys (hence that one guy's broken rib)
WWE didn't know/didn't care about MMA, underestimate's Puder, get's caught in submission.
In shoots, Angle has claimed that he verbally chastised Puder for pinning himself and losing, not for applying the hold, like most people thought. In reality though, I'm willing to bet all of my money that he was caught off guard and his ego took a hit.
Typically WWE, SO ingrained in the "everything's a work, brother" mentality, that they think they can control these shoot style situations. Also probably had Angle and others blowing smoke up their ass, thinking he could take anyone. Same thing with the Brawl for all.
Hell, Jericho's book mentions Frank Shamrock and a bunch of UFC guys walking around. Vince got surly with their presence and said "well, we've got Malenko, Brisco etc... with us". Thinking his crew could step to Frank's if shyt went down.
He's insanely out of touch with the real world when it comes to fighting.