A word of caution on Foote's The Civil War: A Narrative: It has largely been surpassed by subsequent authors who incorporate things Foote missed, such as the role of women, black Americans and other minority populations. Foote has also been accused of Southern bias (and there's been plenty of electrons spilled in arguments over that) and being influenced by Lost Cause ideology. /u/Borimi offers a pretty good explanation of the historiography surrounding Foote in this post.

The principal issue (in my view) causing McClellan's caution in the Peninsula Campaign and first Maryland invasion was poor intelligence work that led McClellan to believe that the Confederacy had many more men than he did. This belief was a key driver of his caution; he moved slowly and carefully prepared lines of retreat and supply because he believed the South, should it bring it weight of numbers against him, could destroy the numerically inferior Union Army and leave the North vulnerable to total defeat.

Note that in the first years of the American Civil War, there was no unified, centralized military intelligence service. With this lack, McClellan relied on the services of a civilian: Chicago detective Allan Pinkerton. This was a grave mistake, as despite Pinkerton's reputation, he was completely unequal to the job, and he grossly overestimated Confederate forces during his time with McClellan.

For example, look at the Seven Days battles in June/July 1862. Pinkerton thought the Confederate Army had about 200,000 soldiers facing McClellan. His estimates listed 220 units of regimental size. He correctly labeled all 178 the Confederates did have, then added another 40 or so more. Pinkerton exacerbated his error by incorrectly gauging the strength of those units.

Pinkerton placed too much reliance on defectors (who frequently were planted by the Confederates), spies (who rarely got close enough to Confederate units for accurate information) and refugees (who provided rumor and gossip).

Pinkerton failed to provide accurate maps of the Peninsula or to accurately describe Confederate works before assaults revealed them. This fault is not wholly his, however, as the U.S. Army's topographical engineers bear some responsibility as well.

The U.S. cavalry could have remedied some of these flaws, but in 1862, this force was organized poorly and poorly led. It also suffered in a torrentially muddy summer that limited its mobility. The swamps and lowlands of the Virginia Peninsula were hardly the wide open fields of Pennsylvania and Maryland (where they would later perform well).

The end result of all this was that McClellan believed he was outnumbered and had to move cautiously, then be prepared to retreat at a moment's notice. McClellan also contributed to the problem by inflating Pinkerton's already-inflated numbers when passing them on to Washington. Edwin Fishel is one of the leading proponents of the belief that McClellan was only happy to inflate estimates in order to garner more soldiers, equipment and authority.

It was not until 1863, when Joseph Hooker replaced McClellan (and Pinkerton resigned in protest) that the U.S. Army began taking the first steps toward a modern military intelligence system. Under Hooker's orders, his officers created the Bureau of Military Information, which contributed greatly to the victory at Gettysburg.