From Space Shuttle: The History of the National Space Transportation System, pg 236:
At least one NASA official, Chris Kraft, Director of JSC, publicaly expressed his opinion that this money was largely wated. He expected neither the laboratory’s systems to last long enough, or the space shuttle to be flight qualified soon enough, to successfully complete a reboost mission. Nevertheless, JSC began to staff up a Skylab rescue group under the direction of Charles Harlan. By October 1978 Harlan had sufficient people and resources to keep five flight control teams working three shifts a day. A few has sat behind the same consoles during Skylab’s three operationsl missions, but most were new with little operational experience in monitoring on-orbit operations of any sort, let alone ones as complex as Skylab’s.
Having started with little confidence in the aging systems aboard Skylab, the group soon discovered that they were in remarkably good shape. The group regained the use of the on-board computer complex, and engineers from MSFC devised new procedures to control the laboratory’s attitude without using the limited propellants available for the reaction thrusters – the propellants would be necessary to regain control after reboost to higher orbit.
But it was not to be, and the year-long effort to save Skylab ended abruptly in December 1978. Although the [Martin Marietta-designed] teleoperator propulsion unit was approaching final assembly, problems with the SSMEs [Space Shuttle Main Engines] had convinced planners that a space shuttle mission was not likely before the end of the decade. NASA Administrator Robert Frosch informed the President on 15 December 1978 that Skylab could not reasonably be saved, but that NASA would attempt to command reentry over unpopulated areas.
So Skylab was still functional and could have served at least limited purposes as a space platform had the Shuttle development followed schedule. No doubt repairs to the heat shield could have been effected, and from the information I can find the loss of one panel didn’t cripple the basic operational capability of Skylab. But its ultimate functionality would have limited by design; Skylab was part of the abortive Apollo Applications program, a planned series of Near Earth Orbit missions that would use up legacy Apollo and Saturn V hardware with little additional cost. Skylab (which was a gutted and modified Saturn IVB upper stage) was supposed to be the first in a series of stations deployed in a program not unlike the Soviet Salyut stations or the Air Force’s stillborn Manned Orbiting Laboratory (supported by Blue Gemini) in which each station would improve upon the design of the previous. Instead, Congress voted to scrap the remaining funds allocated to Apollo and cancel assembly of already fabricated Saturn V components. (This may or may not have had something to do with eliminating competition with the ever-increasing projected launch cost of the supposedly-cheap Shuttle.) Skylab died a firey death, and if it had not, it wasn’t really suited as a hub for expansion to a larger platform. It might have made a convenient test platform, but ultimately it would have been scrapped and deorbited in favor of a successor.
In any case, Reagan boosted for Space Station Alpha, a massive space platform that made Skylab look like a pressurized garbage pail. In the wake of $100B+ projections for the cost of a Mars mission that Alpha was supposed to support, the proposal was scaled back to Freedom Station, later briefly rechristened Reagan Station, then slightly killed and then reborn as the seriously abbreviated International Space Station, which itself has been scaled back repeatedly to being little more than a slightly larger version of Mir.
The future of the ISS–which owing to the cancellation of the propulsion module lacks its own maneuvering capability and has to be boosted by either Progress flights or the soon-to-be retired Shuttle–is in question, and now we’re back to trying to go to the Moon again. Do you get the sense we’re running in circles?
Stranger