I see what you're saying, but I disagree. I'd rather see a good non-musical film than a crappy movie musical. Speaking of the film genre of entertainment in general, more than half of the movies released every year are SH*TTY. We've been fortunate that most movie musicals have been made well (only compared to films in general, as you did earlier). However when looked at individually, a lot of musical films have their flaws (but what film doesn't?).
I root for the home team (the movie musical) any time when I hear about a project in development (even if the title of such a film is GREASE 3), but when the product is released, I will certainly have an opinion and share it.
Pre-CHICAGO, studios were not doing musicals. Post-CHICAGO, every musical made famous on stage was getting green-lit. Unfortunately, the first to come out of development happened to be clunkers. If we are going to continue to demand that good movie musicals get made, then we must not let the wrong people make them. HOPEFULLY studios will have learned their lesson after the directing and casting decisions of RENT and THE PRODUCERS...
"The Spectacle has, indeed, an emotional attraction of its own, but, of all the parts, it is the least artistic, and connected least with the art of poetry. For the power of Tragedy, we may be sure, is felt even apart from representation and actors. Besides, the production of spectacular effects depends more on the art of the stage machinist than on that of the poet."
--Aristotle