King James directed his colonists to name their town after him, and they were politically-correct enough to rename "Powhatan's River" as the James River.
Christopher Newport followed his orders and brought the 104 colonists far upstream from Hampton Roads when selecting the site for Jamestown. The colonial capital struggled through hard times initially. England had experience with settling Ireland, but Virginia was far different.
Powhatan skillfully milked the colonists for ornamental copper and beads, plus the iron tools (hatchets, needles, etc.) that dramatically improved Algonquian agriculture and the manufacture of clothing. He even obtained guns and training to use them. The English were aliens who just appeared without warning in his territory, and Powhatan restricted their expansion outside the settlement for several years.
The English had abandoned Roanoke Island twice in 1584 and again in 1585 before the third colony in 1587 was "lost." Jamestown was abandoned too, in 1610. After a winter known today as the "starving time," the English settlers crowded aboard ship and fled Virginia. They sailed down to the mouth of the James River, headed home in defeat - where to their surprise they met Lord De le Ware, arriving from England with new supplies and new colonists. The colonists had not burned the fort at Jamestown before leaving, nor had Powhatan - so the English were able to return to Jamestown and start over again in June, 1610.
The colony struggled along through the first Anglo-Powhatan War in 1609-14, which ended essentially when Powhatan decided to adopt other tactics and signaled peace by allowing his daughter Pocahontas to marry John Rolfe in 1614. Rolfe identified how the colony could make a profit, after he imported sweet-scented tobacco seeds from the West Indies and grew a crop successfully. Tobacco, an agricultural product which had no value as a food, quickly became a wildly marketable product in Europe. The colony had discovered an economic basis for survival, and all open spaces - even the streets of Jamestown, at one time - were planted in tobacco.
Jamestown did not grow into a major population center initially, because the whole colony was slow to grow even after the success of tobacco became clear. To attract immigrants, the Virginia Company allowed colonists a form of self-rule via a House of Burgesses, ending the martial law imposed by Sir Thomas Dale in 1611. This group first met in July, 1619, and it continues today as the General Assembly. The original meeting spot was the church in Jamestown, the largest facility in the colony.
If you visit the brick Memorial Church on Jamestown Island constructed in 1907 or the reconstructed version at Jamestown Settlement, you can see that the building was tiny. In a society without easy access to soap and running water, where men squeezed tighly to fit into a small confined space with no fans or air conditioning in July, it's not hard to imagine why meetings were short and occasionally tempers would flare.
By the 1690's, Jamestown was still a tiny village with inadequate meeting facilities for the House of Burgesses or the General Court. Though medical care in those days was unsophisticated, the colonists understood that the swamps between Jamestown and the mainland were not healthy places.
The statehouse in Jamestown burned on Ocober 20, 1698, perhaps as a result of a fire caused by a prisoner in jail awaiting execution with nothing left to lose. Before that fire, proposals to move the capital to Middle Plantation nearby were considered too much effort. After the statehouse was destroyed and a team of students at the new College of William and Mary presented a proposal to move the capitol to their site, the House of Burgesses approved a bill to construct a new statehouse building at Wiliamsburg. The result was a new capitol (building) in a new capital (seat of government). The local county seat for James City County remained at Jamestown for nearly 20 more years, however.