You wonder why sailing is a dying sport, a dying activity? It is not because we sailors are not inviting enough novices in. The marine industries stopped catering to the affluent-but-not-rich masses in the late 80s, and they have been headed down ever since. The other thing you can notice about this past weekend's local races - the Down the Bay race and the St. Michaels race - is not too many people are participating any more.
You're lumping a crap load of factors into one post, so much so that I don't know if I agree or disagree with you.
I'm pretty sure I disagree with the assertion that the marine industry stopped catering to the affluent but not rich masses. I'd argue that economics has greatly reduced those that fall into that category, and that the preference for instant gratification have decimated them even more when it comes to recreational boating. I think its far more likely the marine industry and sailboat sector especially have tried to find ways to adapt to that changing environment and have been somewhat successful doing so. You cannot argue that the size of a "starter" sailboat has increased drastically over the past 10-15 years. Apparently these boats provide more margin and a better chance at survival compared to selling more smaller boats. Lastly, I don't know that as a percentage of income that the cruiser racer of the 70's-80's posed any less financial burden that today's offerings.
Going back to your comments on rating schemes and results, you have confused me. If a new design boat completes a course of sail faster than a older boat design, but looses the "race" because of a handicap system, are you saying those are the results that matter and the old boat is the better boat?
Many people see lots of issues with the PHRF ratings, sometimes with diametrically opposed views. Many think the system is flawed if the newer boats don't dominate and others complain if older boats seem uncompetitive.
Regarding declining numbers participating in DTB, consider that it does compete with another, shorter, distance race will less daunting logistical issues.