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I never got to play DQ5r...but 8's didn't really feel fundamentally different from 7's, or any of the previous ones (at least, not to me). And the story was the best the series has yet seen, in that it was coherent and enjoyable without being far too scattered (DQ7) or simple (all the previous titles).
DQ5r, at least the PS2 version, had the battle system so optimizied that a really easy encounter could be finished in about two seconds. In DQ8 you have to wait to watch all the enemies do their battle animations over and over again which is so meh. Speaking from the Japanese perspective too, DQ8 had a midi soundtrack whereas DQ5r had a fully symphonic soundtrack (if I understand correctly, foreign versions of DQ8 have the symphonic soundtrack though).
I always thought that story was a strong point of DQ. Well, DQ1-DQ2 were very bland, but DQ3 had that huge plot twist at the end. DQ4 is remember fondly in America for the chapter system. DQ5 is the video game equivelant of a Greek epic, spanning three generations. To this day I single out DQ5 as the best RPG ever made (so my opinion may be a wee-bit biased). DQ6 with its phantom world system was no sloucher in the story department either. As far as story goes, DQ8 was a step back I think. It's just a very straightfoward story for a series that has such a rich history of using unconventional methods of storytelling.
I really wish we had gotten DQ5r on PS2 instead of getting the DS one next year. I fear what they're going to do to DQ6, because the SNES version is gorgeous, and I haven't been thrilled with how DQ4/5 look on the DS.
As much as I like the franchise, I can't see Dragon Quest having any major appeal in the west no matter how hard they market it. Originally released in 1986, Dragon Quest practically inveted the jRPG genre. And for its time it was a very innovative title. The concept of Dragon Quest is that games such as Wizardry and Ultima were too complicated for consoles, so they made a derivative game that was built around using the standard famicom controller. You can tell that they had Ultima on the mind when they made the interface too, with odd artifacts from the Ultima interface (commands for door, picking which direction you talk in etc, the battle system) show up in DQ.
A generation of gamers were weened on Dragon Quest, and it is one of the most popular series in Japan. The appeal of DQ in this day is that while all other series seemed to grow and evolve with the times, only DQ has remained true to its core concept over all this time. In a constantly changing world, DQ remains steady and consistant, a reminder of a simpler yet enjoyable past. The Japanese attitude towards DQ is not that different from the American one towards Madden.
I just don't see why Americans would suddenly hold an interest in this game. There's a long tradition here, but objectively speaking the game is boring and old-fashioned. In Japan DQ is sometimes called the "National RPG" of Japan, because of how the simple game is engrained in the culture. DQ games are indeed very solid, but make no mistake, the main reason people play is out of pure nostalgia.
I don't think your final conclusion here makes any sense at all. Yeah the series has stayed close to its roots. But people don't play them for nostalgia. They play them because they enjoy games like that (same reason so many Americans enjoy Madden). They enjoyed them when the first few came out. They enjoy them now. Like you said, they're solid RPGs. How is it "pure nostalgia" to enjoy playing something thats well made and that you like?
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I really wish we had gotten DQ5r on PS2 instead of getting the DS one next year. I fear what they're going to do to DQ6, because the SNES version is gorgeous, and I haven't been thrilled with how DQ4/5 look on the DS.