re: Serious shortfall
Spaceflight Now has a good article on the launch. It appears the nanosats were released by a timer at approximately 57 miles high, way too low to survive. While a timer is simple, it's also stupid. Had they used a signal from the guidance system to release the nanosats, then they would've worked. However, that might complicate the guidance software.
As to the cause for the lower than expected performance from the first stage, it'll take a while to determine the cause. It could be a number of things, including improper H2/O2 mixture, lower than expected thrust or Isp, etc.