Good discussion here. Tend to agree with CanonEOS. Which explains why The Pro1 never continued with newer models after that.
I think the trend has been to pull more and more amateurs into the DSLR market, whether or not they need such a cam. Canon can make a lot more from there. A lot of newbies are getting in to it without really knowing what to expect. "What lens should I get? Is the kit lens good? How do I control this and that?" These are very common questions. My colleague was enticed by the 300D when it came out cos it was affordable even back then. But he didn't know many functions as a beginner. In the end, he realized he hated the weight and bulk, and sadly, the cam becomes a white elephant!
Once you're into DSLR, u start off with a kit lens (or those who are rich enuff, an L), then you yearn for more and more lenses, more L's, more f/2.8 zooms, more f/1.4 bokeh lenses which in the past were only used by pros but now even by amateurs. Canon seems to be saying, you want RAW? Go to a DSLR. Sorry, no RAW in compacts! And market research probably also shows that amateurs hardly shoot in RAW for compact cams.
Then there are the accessories don't forget. Flashes, battery packs, and the next thing you know, these guys are gonna ask, should I change my 400D to a 30D, or to a 5D/1D series? Just look at the questions asked here and you'll see. It's a chain reaction!
So I think the advent of the 350D/400D does have a role to play in killing many of the wonderful features of the past G series cams.