In short?

The war dragged on because it was a very "all in" affair; that's what total warfare is. The French were being invaded and they would not accept peace until the Germans were pushed out. The Germans were not going to get pushed out because they knew it was victory or total defeat. The British, after the Somme, had invested such an incredible amount of manpower and wealth in the war that anything but total victory could not be accepted on a political and social level. And all sides continued because all sides truly believed victory was within grasp until the bitter end. Even the Germans, who in retrospect were basically on a downward spiral after the Somme in the West, would make great strides in the East and free up millions of men for one last grand push.

I would be careful of Ferguson's views of the war as well. He's a wonderful economic historian but, frankly, is a bit of a nationalist knob. As the First World War is basically the end of the British Empire's existence as the preeminent world economic powerhouse and the end of their colonial enterprise he's taken a very...harsh view toward the war. Especially anyone who supported it in any capacity.