I think it's just not important to the story so it never comes up again. Isn't it convoluted enough? I think the only reason it's there at all is to make another connection to the story of Rapunzel. The complication of the book is one of the criticisms frequently given to
Into the Woods so a person could consider that a flaw. And no, the baker probably isn't all that smart. His wife is the brains of the operation.
And no, the Baker and his Wife are not based on characters from some story that inspired Schwartz's musical. In fact, a little research shows that Schwartz's musical is based on an old French movie from the late 30's called "La Femme de Boulanger", which is in turn based on a novel that screenwriter wrote. The jury isn't decided on that last one since both apparently came out in the same year.
They're original creations. They just seem like stock fairy tale characters because they fit so well. I'm sure there are fairy tales with bakers with wives somewhere down the line, but I believe Sondheim has gone on record several times saying they created the characters.
yr ronin,
joey