In order to take advantage of the greater
port-density(-per-dollar) on FR switches right now, the
end user has to use FR, which is not always practical
This is actually not true, at least one popular brand
of FR switch has a builtin PPP FRAD (I must say that
debugging the connections is still a medium nightmare).
I agree with most of the other points you make, you do
miss one other potential reason for using FR/ATM technology:
competing in the VPN market with the old players there
(Sprint et al).