Although I agree that the scanner manufacturers can't make their products work 100% perfect for every possible scenario I refuse to believe that fixing the LSM issue would be too costly, at least in new scanners, even if they can't come up with a software fix for current hardware. If a $20 DVB dongle and a piece of well-written software is able to properly decode a P25 type I/II system with little to no distortion in the audio that tells me that with a cheap hardware change and a software redeign the scanners could be made to work well on a simulcast system. It doesn't need to be professional grade audio, it just needs to work.
I also disagree that we (the hobbyist) are asking too much from the scanner manufacturers. Look at analog trunking systems. When they first arrived on the scene the scanner makers could have ignored this as it was still possible to listen to the trunked systems by scanning the conventional frequencies, but then most people would have been in the same boat we are in now which is looking for a commercial grade radio so they could properly "follow" a conversation. Instead, scanner makers chose to upgrade the technology in the scanners to support trunking and raise the prices, and we bought them. When digital systems first became popular the manufacturers created digital scanners at twice the cost and we still buy them. I don't see why fixing the LSM issue would be any less of a priority. In fact, as more and more public safety systems move to P25/simulcast technology the current scanners will become less useful. Sure, there are other things we can listen to but lets face it, a majority of the scanner hobbyists listen to first responders and less are able to do so because of this issue. Why do you think there are so many people moving to commercial grade radios?
The only reason I can think of for scanner manufacturers to ignore this issue is because, like RF Guy said, they think it is a dying hobby but anyone reading these forums (and others) can see that this is not the case. People are simply abandoning scanners for other means of listening because of the limitations. In a way, by ignoring this issue, the scanner manufacturers are causing their own demise by not fixing something as problematic as the LSM distortion issue.
Just my two-cents