The awards for best novel in the first five years all went to Michael Mporcock, who wrote "science fantasy" not horror. In fact the first horror writer to win was Ramsay Campbell in 1981This suggests to me that the impetus for the split from the BFSA was led by the sword and sorcery crowd with a strong twist of Tolkien. Although the fact that the best novel was named after August Derleth shows that horror has had a presence since the beginning. I guess you would have to have to talk to the founding fathers, and possibly the odd sister, to know for sure
I can't recall the exact details, but the Derleth name was appended to the BFS Novel Award because he was a publisher of a small(ish) press at that time (Arkham House) that was created to promote the pulp writers including, of course, HPL. He was also a mentor to many then young writers (including Ramsey). In those days, small presses were rare beasts.
Yes, Moorcock won a lot of BFS awards in the early days. Then, as you say, horror writers like Ramsey started winning the award. Nevertheless, some 'fantasy' titles were still winning, such as the Xanth book by Piers Anthony.
I think Moorcock's books were labelled science fantasy by publishers rather than just fantasy, to distinguish them from sexual fantasy titles. It would be interesting to learn if this was, in fact, the case.
Graham is correct, both 'fantasy' and 'horror' titles win the WFA.