WotC has unique IP and strong brand identity (the D&D 3.5 brand. I've seen PF advertisements that declare "3.5 thrives") so Paizo is playing in their home court. Some gamers don't buy 3pp and still consider Paizo to be 3rd party "off-brand". Lots of this demographic stopped buying gaming products entirely when 4E came out. It's just weird how strong the D&D 3.5 brand when it doesn't actually see any first party support.
That demographic exists, but it's not nearly as big as you think it is. Really, it's not. Pathfinder now has a
huge portion of that market, and the name "Dungeons & Dragons" printed on the cover is not going to sway most of them.
Seriously, the companies have
done the market research on this. They've run the numbers.
Again, optional supplements produced at minimal price in digital format to expand the audience.
I honestly don't know how many more ways I can say this.
A) Such products will still cost more than any equivalent offered for a single system alone, even done "minimally." (Assuming you still have WotC's overall production standard in mind for "minimal." Of course, if you go below that, lots of people won't buy them because they're ugly or look cheap.)
B) Such products will not expand the audience to a sufficient extent to pay for their extra costs.
Increased sales and recovering lost brand identity would offset production costs. And how would recovering a demographic lose sales???
And that's what I'm telling you--it
wouldn't. The portion of the 3.5 market that WotC could potentially regain this way is
tiny. It
wouldn't offset production costs.
And you can lose sales recovering a demographic if you do it by creating a product that lots of your
existing demographic won't buy. And lots of 4E players won't pay extra for a module that costs more due to 3E material, or vice-versa. (And rightly so.)
As far as supporting two lines, the arguments for not doing that have been around since the days of Basic and Advanced. I'm not going to rehash them here; suffice it to say, it's not sustainable.
Look, I get that you
want WotC to do this. But really and truly, it's just not feasible.