Producers don't always get their first choice of theatres. I'm sure they'd take the Booth or one of the other 45th Street playhouses, were it offered to them.
I really don't buy the east of Broadway argument... people find the shows, if they want to see them. Hamlet with Ralph Fiennes, Frankie and Johnny with Edie Falco and Stanley Tucci and Julius Caesar with Denzel Washington all fared nicely in the Belasco, for example. Patrick Stewart in Macbeth turned a profit at the Lyceum. The Blue Room with a naked Nicole Kidman was a hit at the Cort, and 39 Steps is thriving just fine there. But more often, those theatres are chosen as a last resort booking for dicey shows that end up failing, and the theatre gets blamed for it.
Of the east of Broadway theatres, the Lyceum is the most visible, since it is the closest to Broadway. I never thought it is in such a terrible location... it is surrounded by restaurants, including Planet Hollywood right next door, and Bond 45 across the street, and there is a lot of street traffic on that block. It DOES suffer from a very demure marquee, however. That little sign does not do its tenants any favors.
As far as size of the Lyceum, well, it has the smallest orchestra level of any theatre on Broadway. And it actually only has 140 more seats than the Booth, so it is not like they are selecting a 1,500 seat musical house.
Begin at the beginning and go on till you come to the end: then stop.