As someone who has tried to run Star Trek games where inevitably one player asks to play Jedi, or a Star Wars game where one player insists on being a scientist,
yes.
Kitchen sink settings are great for introducing the game and providing a universal sandbox for all the material that the publishers produce, but they're not so great for building a unique world or telling different stories. Part of the reason novels, movies, plays, and so on have so many settings is because it aids in telling different stories. The same reason we exclude machine guns from fantasy settings, or magic from sci-fi settings, it's perfectly acceptable to exclude certain races, classes, or race-class combinations from a setting.
As far as the argument that excluding certain game mechanics will reduce sales, I don't entirely buy it. If we accept that it's true, that should mean that doing the opposite is true: publishing as much material as you possibly can will increase sales. Or, alternately, publish material that's so generic that it applies everywhere and has no setting linked to it at all. This is the method that Savage Worlds, GURPS, and even game systems like d20 Modern effectively take where your class is your role rather than your job. But... those game systems aren't as popular as D&D, and when D&D tried publishing content for everything it could think of -- in 2e, 3e, and 4e -- the market collapsed.
The problem with publishing a second setting is that there will be three types of customers: a) existing customers who are not interested, and b) existing customers who are interested, and c) new customers who are interested. The problem with publishing current setting material is that there's very few people in part (c). You need a new product or a new setting to get those new customers, because you're missing all the customers who like your game system but don't like your setting. If b + c is more than a + b, well, you know what you should be doing. The question is: is it?
Even then, since both your products use the same game system, you're always going to wonder if you're not drawing in new customers because they don't like the game system, or if they don't like the settings! In that sense it doesn't matter how many settings you've got. So, is it worth it to divide your customer base to potentially draw in new customers?
See, we're calling FR a kitchen sink setting, but it's really not. If it
were a kitchen sink setting, then everything from any new setting's books would be in FR. Yet I don't think we'll see an Athasian continent appearing off the Sword Coast from the cataclysm of the week should they publish an adventure in Dark Sun (don't quote me, though, WotC's done that before). The reality is that kitchen sink settings
aren't kitchen sink settings once a second setting is published!
Now, some players don't get that. They want Half-Giant Gladiators and Thri-Kreen Psionic Monks in Faerun, just like some players want lightsaber-wielding Jedi on the bridge of the Enterprise (even if we're talking about
this Enterprise). Some players might object to the mixed mechanics, but some players find the game much more plastic than others do. They really want a
true kitchen sink setting, or feel like they're missing out if all material isn't in their setting.
Alternately, others might rather that WotC just
not publish material that conflicts with the existing "kitchen sink" setting, but this is more that some players only want material published for the setting they're using rather than any formal adherence to the notion of an all-encompassing setting. Now, in that sense it is unfortunate since the limited resources to produce materials means that the more other settings get the less the default setting gets.
All this leaves the publisher in an awkward situation: Do you publish more content in your existing setting to satisfy your existing customers? Or do you publish more content in your new setting to provide support for the customers that your new setting has attracted? If you don't do the former, you're abandoning your old customers; if you don't do the latter, you're abandoning your new customers. Even if you're talking about publishing a setting that's a
strict subset of your kitchen sink setting, these same questions need to be answered.
The OGL helps the publisher in the sense that it puts all the risk for introducing a new setting on others, and you can still generate sales by selling the core books... but it also means you don't get as high of a profit since others reap the rewards.
TLDR; Publishing a new setting book might decrease sales from existing customers, but it might also increase sales overall due to new customers.