Q:  How did the literalist interpretation of Christianity win out over that of the Gnostics?

A:  It didn’t.  The Gnostic “interpretation” came considerably later than the orthodox Christian teachings about Jesus.  In most cases, what we call Gnostic Christian writings were written 100 years (and in some cases 200-500 years) after the orthodox Christian writings (this, by the way, is widely-accepted among scholars, even non-Christian ones).

At best, one could say that Gnostic Christianity came to be a parallel minority that existed alongside orthodox Christianity but then ultimately died out because a) it did not have the historical inertia of orthodoxy which could trace its teachings back so much closer to the time of Jesus and the apostles b) it was never as widely practiced as orthodoxy and c) its writings were never widely disseminated (likely because they were not generally considered authoritative or even accurate).