IMHO, pros are much more heavily invested into lenses, accessories, etc than someone stepping up from point-and-shoot into a $500 DSLR, so even if Nikon releases a superior product, it has to be substantially better than the Canon alternative for people to seriously consider switching systems.
True, but the students of today are the pros of tommorow. One of the reasons Canon has done so well over the last decade is they have such a strong 'entry level=>pro' upgrade path, so when people are just getting started out Canon has a good lineup for them to explore and as their careers progress they have better options.
Nikon, if it wants to expand its market, is not going to go after established photographers with their brand loyalty/investment,.. or at minimal they would be foolish to.. no, what they would have to do is go after the newbies and students.
I wouldn't dispute that. The entry level of DSLRs segment is where brand loyalty is built. The beginning of my career just happened to coincide with the dawn of the digital age, when Nikon was a joke and Canon offered a far better product. That's the reason why I invested in the Canon system and continue to shoot Canon to this day. That said, Nikon has made tremendous strides since then and it would be a much more difficult decision today for up-and-coming photographers to choose brands.
The advantage Canon has due to dominating the pro market is that those pros will usually recommend Canon gear to other people. It also gives Canon an image of perceived superiority regardless of the quality of the product. People might think "hey, if all those pros shoot Canon, it must be better."
Some people think that this has led to complacency at Canon. Maybe there is some truth to this, but IMHO Canon still puts out a great product. Internet dweebs are really hung up on bodies, but when I see Canon releasing radio flashes and developing a ton of new lenses, it shows me their commitment to offering the best overall system on the market.
With all the stink about the 5DIII and D800, you'd think that every last stop of DR and noise is what separates a great image from a terrible image. Now that these camera have started hitting the streets, what do we have? People posting a bunch of snapshots with $3,000-$3,500 bodies that could have easily been captured with point-and-shoots.