Well, JetBlue kind of does this already. You get more leg room and infinite snacks/drinks on every flight. They also have live television for free, in flight.
Virgin America has leather seats, AC plugs in every seat, $12 wifi, decent meals for $10 and lots of TV channels with LCD screens at every seat that go on all by themselves. They still packed us in like a sardines but, hey, I could have bought business class for an extra $100 at the gate (I bought the meal and used the plug, though my laptop was a bit big for the space).
I personally found the experience like a bad sci-fi nightmare but it does seem they are trying for what some people might enjoy.
I've flown Virgin America's business (I think they call it first) class when it was only a $60 upgrade (SFO to LAS, not a long flight) and it was the only truly enjoyable flight I've had, at least since I was a kid. But I probably wouldn't do it again, even at sixty bucks, because heck, sitting in a comfortable chair isn't that fantastic. I can do it at home for free. And while I got a free glass of MacAllan 12-year, they still didn't give me anything to eat except a bag of chips.
But yeah, in economy class there's only so much that can be done to make the flight more enjoyable without giving people more room, and getting a little more room turns out to cost more than most people are willing to pay. Still, I'll take a Virgin America flight over an American Airlines one any day.
At 6'2" I've always paid for more room when given the chance and a reasonable price. Last time it was offered at checkin I think it was $35 each way for 6-7" of extra room. It doesn't sound like a lot, but it makes a huge deal.
getting a little more room turns out to cost more than most people are willing to pay
I don't think it turns out this way at all, since I don't recall ever having the option of paying for more room (and nothing else). The physical seat type always seems to be bundled with something else, such as an upgraded meal.
I'd be curious as to how much of the cost of the flight is weight versus space. I don't doubt that it leans heavily toward space, if a European airline is considering a sort of standing "seat." However, the ratio would help reveal what an extra inch of seatch pitch (and/or width) would actually cost.
I don't think it turns out this way at all, since I don't recall ever having the option of paying for more room (and nothing else). The physical seat type always seems to be bundled with something else, such as an upgraded meal.
Many airlines now have a "premium economy" section on international flights which offers just this. Maybe some of them have minor extra features too (like, I think I got a free drink before takeoff, and I certainly got better service, the one time I got upgraded to Premium Economy) but basically it's just the extra legroom. I'd probably pay for it on long flights if I were just a little bit richer.