My guess would be that quenching occurred due to excessive pressure. Energy increases as the square of voltage, leading me to believe that pressure (and thus resistance) in the arc may do the same, being as it is confined. Obviously more energetic arcs will be hotter, so this isn't a simple relationship (nothing is in plasma physics

). I had been using a very low ID (1mm, I believe) capillary tube, 25mm long - an extreme case tested simply to see what would happen (discharge was 7.5kV, 16uF). Achieving this effect was MUCH easier when using electrolytic capacitors in the 1.5kV range. I suspect that in your design it will create a significant problem.
A smaller chamber may or may not result in increased pressure; we're trading heat for pressure here by ablating a liquid/solid material, and if that is removed completely the launcher is nearly useless. We obviously need higher temperatures (meaning higher energy:working fluid mass ratio) for higher speeds, but that's a separate issue. These systems are far too complex to be easily predicted by generalizations such as lower volume = higher pressure.
As I noted earlier, very low voltages will cause you trouble. You'll need an inefficiently large ID on the capillary tube to compensate.
There's another issue here: while resistance outside the ETG should be minimized, you WANT high resistance in the plasma, as much as possible without quenching the arc. Once upon a time, I found a paper about measurements of resistance in capillary tube discharges. The figure was in the tens of milliohms.
If the plasma has very low resistance (stemming from excessive temperature or insufficient pressure, as can be caused by poor capillary design) it will be an efficient conductor, the exact opposite of what you should be looking for. You want a resistance spike after vaporization of the fuse wire, not a drop.
Your worry is well-founded. While adequate for the ETGs seen in common hobbyist use, 450V is likely not sufficient for a serious build using a capillary tube plasma generator system.
I've seen what you describe as well, though only in the context of improved optical properties of the plasma for ignition of propellants. Could you link me to the paper you found on the matter for pure ETGs? I doubt its usefulness, considering that such material will result in more efficient conduction (causing a drop in ballistic efficiency), and the fact that the quenching problem can be solved by optimizing capillary tube dimensions without sacrificing efficiency. I am, however, by no means an expert, and this intuition may turn out to be entirely wrong. Aluminum powder mixed with water is a poor example, as it results in a reasonably energetic chemical reaction which produces hydrogen gas, going far beyond simply modifying electrical properties of the plasma.
I know very little about what precisely goes on between switch closing and beginning of capillary tube ablation, and can offer you no useful advice on that matter. Links to papers dealing with that topic would be greatly appreciated.
Super-absorbent polymer? Tell me more. A water-based foam would be ideal as a working fluid, and I imagine that this polymer, whether or not filled with water (apart from obvious shape and sealing issues which I will assume to be countered by the particulars of your design) would make an excellent capillary tube material.
On that note, I'd really like to see your design.
Spudfiles' resident expert on all things that sail through the air at improbable speeds, trailing an incandescent wake of ionized air, dissociated polymers and metal oxides.