Well actually you could trade between GSC and RBY but it was ridiculously complicated. Basically you obviously could only trade Gen 1 Pokemon, but they could only have moves they could learn in Gen 1. This was a separate function in the cable club known as the Time Capsule, which can be accessed once you get to Ecrutek if I remember correctly.
So say that you had a Venomoth with Gust, well you can't trade him because Venomoth can't learn Gust in Gen 1, which I remembered thanks to having a snarky GS player's guide. You had to delete Gust to trade that Venomoth back into RBY whether by learning a non HM move that was in it's Gen 1 moveset or the move deleter in Blackthorn.
This was the only time you can actually trade Pokemon between different generations, but it was so complicated that people would get easily frustrated and not bother. On the other end trading certain Gen 1 Pokemon into Gen 2 had a chance of them having certain rare Hold Items depending on the Pokemon.