Oy BJL, hands off my 5D
Seriously though if canon are willing to fill that niche then they are still selling the 5D well to the wedding/portrait/landscape market with the lenses that go with it.
Let's face it, the entry level market is where the real money is, it's no secret. I'm sure the D2X and 1Ds mkII or even the 1D mkII also sell fractions in comparison to the D50/70 and 350D but that is the point, they need to be there for the pros and for the companies street cred.
Lets face it, even if the original groundbreaking 1Ds was a loss leader, it did an incredible amount for canon's prestige, for the canon name, no doubt sold more canon lenses than any other camera ever made (considering it pulled in so many nikon, minolta, med format shooters, etc) and even now is considered a ground breaking classic. The 1D and mkII has insured that the sidelines of any sports game, press scrum, catwalk or indeed any where you see a journalist there are a bevy of white lenses. Did not the 1Ds and it's successor ensure that medium format prices on ebay are just silly? Did it not contribute to the death of Bronica, Contax, possibly Mamiya? I would not doubt that it was these bodies far more than the digital medium format niche which killed those manufacturers and believe me Canon are milking it for all it's worth.
Another point, anyone who is going to spend the money on a stitching setup (software, tripod setup, brackets, learning curve, more computer memory etc) might well forgo the bother and spend the extra. Stitching is not for everyone and as you say, more suited for those used to a large format type shooting style with the added pain of all the extra time at the computer afterwards. I would of course be useless for a majority of subjects where stitching just wouldn't be an option and that is pretty limiting.
I also think that it's important to reiterate what I said earlier here. Many many people here are shooting these so called 'OTT expensive' digital solutions because it makes sense financially for them. Yes for enthusiasts the math may not add up, but hey how many of them are even shooting a 1Ds mkII never mind a medium format back. Of course many of them do have the 5D but once you've had the 20D it's only a step up in price isn't it? There I do agree with you wholeheartedly, if it isn't making economic sense then it's just paying lots for nice toys and we know how vulnerable us blokes are for that kind of thing not least with cameras!