Have you ever picked a slightly more expensive nonstop flight instead of one with a layover for a vacation?
This is similar. 3.5 hours vs 7 hours is a pretty good difference.
You can take a 3.5 hours flight in the morning and have energy to see a city the whole day after that. Maybe not after a 7 hour flight unless you are a pretty experienced and motivated traveler who can sleep the entire flight and have the mental energy to enjoy new things after that.
That depends entirely on how much "slightly more expensive" is. For the vast majority of the travelling public, they'll choose the cheaper option and we know that because that's what they choose already.
I do actually think you're right, but the counterpoint is that airlines have slowed down all their flights to save money, and no one has come in offering a faster flight in exchange for more money.
Maybe the delta just isn't enough to matter? Or maybe people aren't willing to pay for it.