Docwarnock, I agree - HT as a phenomena exists because of the classic marketing of creating a solution to a problem that didn't necessarily exist. Show people something cool, and sell them on how there life would be better if they owned one, and they'll want one / buy one. It's all been done very successfully.
To give you my answer to your question in your final paragraph, I think the lack of innovation in the high-end is based on a failure by the high-end in general to recreate (redefine) itself. Read any book on successful companies in today's economy, and they'll stress the need to be constantly recreating yourself, constantly making obsolete old concepts / products and creating the new. Recognize the next "wave", that time when things have undoubtedly and irrevocably changed and that you need to change or die (or, in this case, become extremely niche). The changes are there, and have been occurring for at least a decade, in how home electronics are used for entertainment, how music and movies are "consumed", but the high-end still has many of the same mantras and, in general, rejects most of the new.
Mind you, I have no problem with the high-end staying true to the course - I just am not surprised that fewer people are signing on, and that high-end manufacturers are experiencing lack of growth or worse. I think you're exactly right - innovate in a way that gets people to say "Whoa!!!! Cool!" and they'd decide they had to have one. Better yet, put it on display where a large number of people might actually see it / hear it, and you might really attract people (Out of every 100 people I know, I'd venture that fewer than five have even been in a high-end audio store). In other words, put quality audio sound in products that more people might experience and desire, and there's a great likelihood that people would come to appreciate it more.