First impression is the...

DE being the first thing a common user interfaces with, it holds a very important position, in my opinion. KDE and Gnome are very different w.r.t design principles, hence the polarization and debate. KDE and Xfce are not so different. I like Gnome, but have no use for it.

I agree with all else.

Also, I think, a real "free market" would resemble Linux ecosystem. No monopoly, small players and lots of choices. However, if we wish to compete in "real world", we need to do something similar to what you say.