I realize that AOD represents exactly the kind of economy that can't scale up, but every time I see that it's made well over a million bucks, I'm struck by the sense that it really isn't impossible for a developer to make money off non-cinematic RPGs.
It's more than possible. One correction though: AoD isn't just a non-cinematic game. It's a game with crappy graphics running on an old engine. With a good engine and good (but not great) visuals you should be able to sell 150-200,000 copies in the first year. Talking about a hardcore RPG, of course.
I'm not actually sure that I would consider AoD a hardcore RPG. There's so much loaded in even broaching the question that I don't want to create a brouhaha, but part of why I liked the game is that it actually lacks (or lets you bypass) a great deal of the cruft that some would consider a big part of hardcore RPGs. Maybe this is a debate over the meaning of "hardcore," though, which is silly to have. In my mind, the combat is very demanding and the game does have the possibility of dead-ending yourself with a terrible build or whatever, but there are other ways in which it felt considerably streamlined to me (in a good way).
Expecting to fail is a healthy and realistic attitude. Accepting success after expecting to fail is easy (a pleasant surprise, basically). Dealing with failure after expecting success because you're awesome can crush you like a bug. So expect to fail and we'll all hope and pray for you to succeed.
I mean, if Fallen Gods made AoD money and I kept it all, I guess that might have some material impact on me, but nowadays the money I made on Primordia (my most personally lucrative game project -- it's grossed around $500k and netted me about $80k) wouldn't make an appreciable difference, especially if spread across the years it takes to make a game. The money I made on Torment was completely indefensible as an economic proposition -- I was basically selling the most valuable hours of my time (the thin margins of freedom left by a day job and a family) for fewer dollars an hour than I made as a summer school teacher my first year of college. The only way these projects are justifiable are basically as some mix of escapism, vanity, passion, and marketing. The real risk with FG is not that it doesn't make money but that people are so offended by things like baby-eating witches and slave-taking raiders and giving a comely maiden to a wurm in exchange for lore and so forth that it brings me public grief. Or, more likely, that the project fizzles and I'm left with something I'm not proud of. But whether it sells or not really doesn't matter much. There's a decent chance I'll end up giving it away for free, or perhaps pricing at at $2 or something, or giving all the money it makes to the classics department of a local school or library.