I've argued that logic before, but what it really comes down to is this: design is one of the founding tenets of Apple. The second, in my opinion, is ease-of-use. The third is powerful technology for everyone. The last of these is key: for the majority of people, the PowerBook does exactly what it was meant to do. Kick some ass, take names, and look good doing it.
What really is lacking? We all know that the G4 is an old chip. But it's also stood the test of time, which is an enormous feat for any technology, much less the short-lived processor.
I think you're right. If Apple had stayed with Freescale they would have redesigned the 'Books for the G4+. The new G4s have "evolved" and require a complete overhaul. Yes, the Pentium M performs better in some areas, but I would hardly say the G4 is that far behind.
The mobility 9700 is still a very good chipset and does its job: low heat, low profile. Storage continues to increase. Resolution is excellent for most folks (if you really want 1900x1200 on a 12" screen, then a PC with Microsoft DestroyYourVision 2005 is probably a better choice). What else? USB ports? Please. We have sweet keyboard lights and trackpads, FireWire 800, Bluetooth 2.0... I guess I'm just not seeing your logic here.
And back to the "design" tenet... if Apple must sacrifice some fraction of speed and power for design, so be it. That's the way it is and always has been.
I challenge you to show us a PC laptop that exceeds the PowerBook feature-set, while maintaining good design principles. I doubt you can find one less than 1" thick with a 17" screen.
Not to mention Mac OS X and all the other reasons we prefer Mac.
Also: the PowerBook is a premium computer. If you don't really care to pay extra for an aluminum finish, get an iBook! Or don't get the Saab with turbo and fog lights, etc.