Your MFA class anecdote was very interesting - and also tends to weaken your contention to some extent, as I'm guessing some of these MFA students will end up in the publishing side of the business.
So I'm in my second year as an MFA student and people ask me all the time, "What do you guys do with your degree when you graduate?" Well, I'm halfway through the program and I haven't figured that out. Some go on to be college professors of creative writing, which is what the degree qualifies you for. Some had their fun and go on with their normal lives. Some actually write.
In general, high level and mid-level MFA programs, not lesser ones from an online school, promote a type of writing known as "literary fiction." In the publishing world, this is known as "unsellable." Most of my professors have written books I've never heard of and went out of print years ago on whatever small press they were printed on. You've got the occasional Pulitzer Prize winner, but chances are you've only got a few of those in the entire history of the program and yet these programs are churning out more and more writers each year, most of whom will not go on to any real commercial success.
There is a significant difference from what most people read and what is supposedly "great literature." Most of the fiction that has been successful in the last 30 years falls rather neatly into a genre. There is high-end fiction available on the front shelves at Barnes and Noble - Lovely Bones and The Color of Water and the like - but there's also a lot of Dan Brown. This isn't because people are stupid. This is because people want to enjoy the books they read and for the most part, people don't want to read heavily-worded 400 page rants about how miserable the author's life is.
When I was an undergrad at Brown taking creative writing workshops, I was usually one of two people who wasn't writing about a college student who was gay and smoked and described their house a lot. There'd usually be one other person in the class who would try something different, but that was about it. The main comments I got were, "Well, I actually enjoyed reading this, but it's not, like, really good stuff." I don't know. If you enjoyed it, I think I succeeded as a writer.
Once, just to piss off a professor, I wrote a story about gay vampires who smoked and had a torrid love affair beyond the other vampires' backs. I wrote this thing as a joke, but the professor got really into it, and so did the class. I couldn't figure it out, but it was really funny. Oh man, I'm still laughing about that.
What I'm getting at after rambling for a while is that the "literary world" - populated by unpublished MFA students and professors who were published once in the 1970's - is a different world from the publishing one. When the two meet and you get something that's high end and you want to read, you get a Pulitzer Prize winner. They like that sort of thing. One of my MFA professors is on the Pulitzer board. But the two do not meet very often.
(I'm a little temperamental about this because my professors often yell at me for writing stuff that's "too commercial" or "too genre-y" and then I have to take time away from my actual manuscript to write a rambling story about myself. Unfortunately I don't smoke nor am I gay or even having regular sex, so it's really hard)