Fascinating explanation. Thank you for introducing me to the concept of a "triumphant failure"--I wonder whether there's a wiki somewhere listing other famous examples?

However, I think you may be slightly mythologizing this machine. After all, the 808 wasn't designed with emulating real drum sounds as its primary goal--the Linn LM-1 drum machine, which was released a few months before the 808, literally emulated drums via digital samples of recorded drums. The 808 was designed to give musicians a cheap, flexible means of creating demos via the standard analog synthesis that was popular at the time.

With that being said, I think a more probable reason for its lasting popularity has less to do with the machine's ability to capture the essence of percussion and more to do with circumstance: the 808 was affordable ($1,195 versus $5,000 for the Linn LM-1) to the historically impoverished youth who birthed the global cultural/musical phenomenon we know as hip-hop.

sources: http://en.wikipedia.org/wiki/Roland_TR-808, http://en.wikipedia.org/wiki/Hip_hop