First, I'm sorry you received that email.
It sounds like you, like me, got caught up in the transition's negative impacts.
While mine was medical in nature, under the old system, if you had an issue or were not overly competitive for your nomination country, they simply kept you on file until something came up that you matched. You also could be considered for any country at any time in any program.
Nowadays, you are solely considered for the countries you selected - in the old system we didn't select any, you just got nominated. So when I was going to miss my medical clearance, instead of being thrown back in the pool like I would have been just 2 months earlier (at the time), I was told I had to reapply and go through the process again. (just to make it clear, I had applied under the old system, nominated, then had medical clearance issues AFTER they switched to the new system)
I'm guessing something similar is happening to you. You were being considered for a specific slot that they already filled, or one for which they had more competitive candidates for that SPECIFIC position, and since they no longer have a general pool, you have to reapply rather than be considered for anything else, somewhere else, automatically like they used to do.
This is one of my frustrations with the new process, but I do have to say, at least the application was MUCH faster this time around. I actually reused one of my essays from before, as it was still applicable, and am now under consideration again, waiting for interview (got the Under Consideration email yesterday).
I would definitely encourage you to apply again, and definitely select "go anywhere" if you are willing.