I think you have to be careful here. Supremacy is a bad "classic" game to compare the recent German stuff to, as it had so many failings above and beyond just its genre; and Avalon Hill could and did publish many German-ish games (let's not forget that they acquired some of the very first recognizable "German" - actually American - games in the early 3M titles, and printed the first Spiel des Jahre winner - even retaining its German title - to see wide distribution in this country, arguably opening up the "floodgates", such as they are). Whether or not their in-house designers could create a "German" game or not is a separate and somewhat unrelated question, since so much of the stuff they published was created outside the company anyway.

I realize that didn't address the point directly, so maybe this does ... :) It's important to remember that German games still have a low "hit rate” (lots of garbage is published each year), and while it is true that they have a more broad appeal, they lack the depth of the serious "historical" games. German games tend to be entirely tactical, often have more luck than skill, and are generally worse than lousy as history (although I love the atmosphere and art in Ra, it took shocking gall to put in the rulebook which exact years of Egyptian history each round of the game corresponds to). Even the weightiest German game, die Macher, doesn't really involved any serious long-term strategic planning the way games like Republic of Rome, 1856, or Magic Realm do. In that sense, those games are games you can really sink your teeth into, while Basari or Chinatown, good as they are, just don't have the same depth. How can you turn down a game like RoR that turns everyone at the table into completely amoral money-grubbing slimeball politicians? With a brilliant historical context, no less? Now that's a fun game. If you can't laugh at yourself playing RoR, you have no sense of humor.

I still love the classic games like Age of Renaissance, Gunslinger, Hannibal, Republic of Rome, 1856, Up Front, Breakout: Normandy, Magic Realm, and so on, and I don't think "German Games" as a genre have any inherent superiority, even though it's a genre that has produced such outstanding recent games as Settlers and Modern Art. Without question, though, it is a genre that has produced far more marketable titles that appeal to a wider range of players.