Ah, but the company wanted a machine that would be $999 as a starting point. The only way they could do this with the amount of proprietary technology they had developed was to basically re-issue the Plus (selling at $1600 or so by mid-1990) and try to cut down on the cost while modernizing it. This is why the Classic used the same chip that was sold nearly seven years beforehand, has only one ADB port, uses a lesser SCSI specification than its contemporaries, and has a weak power supply and compact motherboard. In fact, the RAM card didn't even come with the Classic if it was purchased with just 1MB on board.
There was so much outcry over the cost of Macs in 1990 that a low-cost model was practically necessary. Also, the entry level machine at the time was so hopelessly outdated that something had to be done, not just to bring down the price to that "magic" level, but also to give it internal hard drive support, a SuperDrive, and ADB.
The Classic II should have sold alongside the SE/30 (albeit a speedbumped SE/30). The newer SE/30 would have had a purpose as a server machine--it's a better option than tower machines because of its small form factor, internal display, and aesthetics. (Believe me, some users get intimidated by the concept of a "server" when they see a huge tower, especially among smaller computers).
I do think they kept the Classic (original) around too long. By September 1992, when it was finally discontinued, the 8MHz 68000 had enjoyed a run of eight years, nine months. To compare, look at the best chip from nine years ago today--a 733MHz G4. In less than three years, everything ran a faster clock speed (this also accounts for the discontinuation of the G3-powered computers). Sure, computers didn't progress as quickly in the 1980s and 1990s, but consumers knew dinosaur technology when they saw it--why else would new in-box Apple IIes made in 1992 and 1993 still be around today? I'm sure some dealers had Classics for years as well. I would have canned the Classic when the Classic II came out, maybe released a lower-end version of the Classic II for an entry-level model (20MB hard disk, 2MB RAM, maybe even a 68020 based on the LC), and kept producing the SE/30--it had a niche market and would have continued to sell, probably to the same folks who still swear by their SE/30s in 2010.