They fail to understand that this small group is actually the first portion of the bell curve: early adopters. Our friends buy based on our recommendations.
Initially popular because they could run linux, I've seen countless friends and family buy the later locked down versions because it looks like the one that their tech savy friend has.
Linksys had really good viral marketing going with DD-WRT. Rather than exploiting it in a mutually beneficial way, they chose to spit in their customer's eye by making successive incompatible versions and charging extra for the "L" model that was nothing more than the original hackable model. I imagine they made more money short term. Today, I don't recommend Linksys to my friends, I don't see them as a stand-out brand (which they were with the WRT54G), and I don't see them as being particularly competitive in a crowded market.
Hopefully more enlightened manufacturers take heed to the Linksys saga and don't make the same mistake. This seems to be the case with Buffalo and now HTC.