It's less about fidelity, more about portability and customizability.

Today we can hear all the hifi we want, it's a trip to see what the imagination can fill in as well.

If you're really into walkmans, check out the Panasonic ultra small ranges.

The point about fidelity/quality is moot anyway when most people are listening to overcompressed[1] music on crappy bluetooth speakers and/or in a noisy environment.

[1] as in dynamic range compression, not encoding

Some decade, bluetooth will get there.

While it's improved a great deal, there remains a gap.

Noise cancellation is getting pretty good.

It is not necessarily a protocol/technology issue, more a cultural one. Most people are just not looking at quality first and will buy whatever is cheap, loud and has the form factor they want. Music is so compressed nowadays that they don't even hear a difference between crappy and better quality speakers.

Very plausible. Until they hear the same song much clearer and wonder what the difference was, as long as they enjoy music :)