I think it would have just diluted an already diluted and generally fair weather fan base.
Likes of Newcastle and Leeds have done alright from being one city clubs.
I don't really buy the rugby argument, not these days anyway, think I've known almost as many people who regularly go to the devil's as much as those that regularly attend rugby matches for any club.
Think it's as basic as we have never had sustained success. The kind of longer term success that generations of fans buy into and get a hold of. I don't mean we had to have consistently won things but being a top division club would have changed the plastic fan dynamic.