In a time when really no one is buying, Hasbro should have made more interesting character choices. Once the reboot in interest had kicked off, THEN they should have made the lesser choices.
the problem with that argument is that the two waves that killed the TLC line were planned out sometime in late 2006/early 2007, long before the big retail crash that left the figures in those waves wallowing on the pegs.
Where Hasbro didn't react fast enough to avoid the problem is in the recall of the figures from those two waves from retail. I could have told Hasbro in May of 2009 what figures they needed to pull from retail to break the automated computer reordering systems free. It didn't happen till August, after a lot of stores had missed out, or gotten low orders, of 4 full waves!
The other part of the problem with your arugment is that while figures of Luke, Han, Chewy, Vader, Anakin, the Droids (sometimes) and Obi-Wan sell, collectors don't always want them. Other than a couple definitive versions of Luke and Han, I probably don't have to buy another figure of those characters ever again. So Hasbro can load down waves of figures with main characters, which, while they may sell to kids, casual collectors and parents buying gifts, it's the obscure characters that the collectors are mainly looking for at this point...and they're the crowd that Hasbro is saying has left them.
The characters that the kids and parents buy are selling fine in the Saga Legends line. I've been to stores outside my area that are choking on Saga Legends, but for some reason, they fly out of the stores in my relatively small town. I have to assume that these do sell in other stores as well, but one difference is that the pipeline for SL seems to be free flowing since it's the same set of 19 characters rotating through cases and not a new case of new characters every few weeks.
As far as Target goes, it's also now my understanding that Target's computer reordering system may not generate a re-order of a SKU if there are enough pieces in inventory for there to be at least one (in this case) figure on each peg designated for. In other words, if the store has 4 pegs for TLC and there are 4 figures, one for each peg, the computer will not order more. The flow of toys to my store seems to back that up. When there were three Stass Allie and one Breha on the pegs here back in late September I thought we'd get new stock. Didn't. One Stass Allie sold and a week later we had a new case of figures on the pegs. That case sold within two days and we got a restock. Unfortunately, the restock was a case of 2008 Wave 4 R2, which included another Stass Allie, Bail and Breha. Four more cases of that same wave later and we now have 6 of each, Bail, Breha and Stass, and we've stopped getting new stock, again.