[StainlessSteelCynic]

The G11 and it's ammunition was a response to the desire for the individual rifleman to be more accurate with his rifle. It followed on from similar US projects (it shared the same intent as Project Salvo). The whole reason the 3-rd burst had such a high ROF was to fulfil the ideal of increased hit probability.
If the design rationale had considered that the problem with the accuracy of the rifleman is more often than not, the rifleman himself rather than the weapon, then there would have been no need for the 3-rd burst and/or it's extremely high ROF.

That would solve some of the heat issue but obviously this was not to be, so the G11 internal mechanism was designed to make use of their pressure release mechanism (which forced air through a high pressure vent underneath the buttstock) to help remove some of the heat buildup. Clearing a round from the chamber was as easy as turning the cocking handle counter-clockwise. With HK getting Dynamit Nobel to develop the ammo and using a denatured rocket propellant, they found one considerable benefit was the lack of propellant residue left in the chamber after firing.
The Mauser G11 candidate could not solve all these problems and faded into obscurity but the fact that the HK candidate not only got accepted for service but was also seriously considered by the US military hints that the West Germans were onto something.

Interestingly, the LSAT project was also looking at plastic cased ammunition and while plastic cased is not "caseless" it has the same lack of ability to remove the chamber heat bugbear but increases the robustness of the individual round... who woulda thought it, firing plastic cased ammo through an automatic weapon.
Oh and in regards to that civilian rifle that fired caseless ammo, while it did not make use of this specific feature of it's ammunition because it was a bolt-action rifle, the ammo was electronically ignited. This allowed the ignition temp of the ammo to be greatly increased while still be able to be fired. It was found that this helped reduce the possibility of cookoffs.

The real problem with the HK G11 was not the ammunition. It was the very average ergonomics of the rifle and the, to be expected, high cost of introducing a new weapons system. At the time, the cost could be justified but with the fall of the Soviet Union and even though the rifle and it's ammunition had been accepted for service, the peace dividend reared it's ugly head and procurement was stopped.
Procurement, not development. The West German government considered the weapon and ammo to be developed enough for it to be accepted for service but even HK considered that more could be done and continued to explore further options. Why would a company spend that extra time and money if the ammuntion was a total dead end?