Yipper -- very nicely put. I think you're right when you say, "the audience is primarily made up of people who have made similar choices to Franklin's in an effort to survive..."
I believe that Sondheim and the creative team have hit upon an unpleasant universal theme that's too close to home.
Yes, audiences have embraced other Broadway shows in the past that have "downer" endings, but maybe not one so close to their own lives. They can cry and sympathize with Maria's emotions at the tragic end of West Side, but it doesn't make them leave the theatre reflecting on their own entire lives, and the choices they've made so far.
When you see the wide-eyed "kids" at the end of Merrily (which is actually the beginning of their promising friendship and careers), it's something that stays with you. Even if you're not in show biz, you can identify with the compromising choices you've made in your own life, and then look at the hopeful kid you once were, and it's not something that wide audiences want to plop down some serious cash to be reminded of at an "evening's entertainment." (I for one, love this show, and am not afraid to look at its themes head-on... but we're a small group by comparison.)
So, basically, no matter how artistically well done or effective a production of Merrily ends up being, you're selling an unpleasent (too-close-to-home) message to your paying audience. I believe that is exactly why Merrily has yet to become a "hit" show in American Theatre.
"Jaws is the Citizen Kane of movies."
blocked: logan2, Diamonds3, Hamilton22