I don't think it's that. I think bar owners just wanted cheaper entertainment.
Some yes, some no.
I'm in a much, much smaller market than you, but from what I've learned from the bar owners/managers I know is that a given concept is good for about 3 years at most, regardless of what it is. So it doesn't matter all that much to them what the concept is in most cases so long as it brings people in and they make money. If they can stretch it out to five years, they're laughing.
I'd agree with ruiner to a degree, live bands seem to be in a down phase, at least locally. Hip hop and dance is all the rage for the moment (or has been forever in various incarnations) in the more popular meat markets. Most of the GH/RB stuff around here tends to be earlier in the week when the crowds aren't really out all that much anyway. But maybe that's just around here.
Regardless I think if you look at it from the positive side, most people understand this is entertainment and if it gets kids playing for real, so much the better. Like all video games, the connection to reality is tenuous at best. I'm sure the majority of COD players don't have any real illusions of storming a beach head or something like that. If they do, they've entered into the dillusional side of things.
As for the Maiden stuff, I guess I'll go track down the Wii version but I don't have hardware for that yet. Trying to wait out the inevitable slash to 50% that should come at the end of summer or so.