As to the hard core flight sim community killing flight sims, I have a feeling that they might have contributed to their demise by making unrealistic demands for the wrong things. This has pushed developers into developing products that won't sell, or which are so complicated and time consuming to produce that publishers won't touch them.
The insistence on stupendously detailed 3D models of everything makes it technically impossible to have the sort of rich environment Zander refers to above. I remember before B17 II came out, reading an interview where the developers said they didn't want large numbers of low detailed aircraft models, and instead were building every aircraft in maximum detail. The result was a sim that ran like a tortoise on the PCs of the day and consequently sold disappointingly, but it also totally ruined immersion (a shame since B17 scored well in many other areas) - every mission involved at most 12 B17s, with maybe up to 6 fighters attacking, a pitiful little cluster of planes, instead of the formations of hundreds of the real war. Why is it more "realistic" to have rotating gun turrets on every one of 12 planes than to have historically accurate numbers of planes even if their turrets don't rotate? The only reason for having all these detailed models is so that every aircraft looks good when studied in paused external view. I would ban external views from flight sims - the only function they serve is to allow people to complain that the models don't have enough polygons. If I want to look at a pretty picture of a plane, I'll look at a photograph of the real thing. Flight sims should be about flying and fighting, not about admiring pictures. But because flight simmers often demand eye candy (and a very specific, one plane at a time sort of eye candy) above all else, developers spend all their time and effort concentrating on the wrong things.
As for hardness - I think hardness in a game is a good thing, but it should be hard to play well, not hard to play at all. A target rich environment packed with friendly and enemy aircraft diving in and out of the clouds should be exciting and frantic enough for any type of gamer, and is also very realistic. Instead we get a handful of beautifully modelled planes engaging in duels - for which it is very difficult to write adequate AI. Of course serious simmers want their full realism modes, and that's where a high degree of scalability comes in. Every option should be swtich off and on able. Though I suppose that adds to coding complexity too.
