Absolutely they do. I remain convinced that something along the lines of K-Line's $40 battery-powered set would be a huge hit if people could buy it somewhere that they're used to buying toys. The K-B toy store at the mall where my girlfriend and I walk had a huge pile of $60 G gauge sets at the beginning of the month. It took them about a week to sell every last one of them. They didn't look as good as even MPC-era Lionel, and chances are they'll be yard sale fodder in six months, but whoever made them got a nice cash injection.
That K-Line set ought to be able to sell just as well, and if inexpensive expansion packs like additional track and cars were available, would keep kids interested in it.
I think plastic track, battery power, and remote control is the future. Rechargeable batteries don't cost any more than transformers; plastic track does great in places you wouldn't dream of putting metal track; and everything else operates on remote control.
I'm sure Lionel and the like can't afford to make such a set in sufficient quantities for the mass market; so why not get a manufacturing partner who has the distribution channels already in place, license the idea and the name to them, and let them handle it?