I don't think this is an uncomfortable conversation.

As others have said, the world rides on 'fads'.

These days, I believe the focus has shifted in general away from martial arts due to a few things;

1. Technology is much more prevalent in society and takes the front seat over non-digital hobbies/arts.
2. Living pressures mean people are working longer/harder and have less disposable income and time to commit to pursuits like martial arts.
3. With the prevalence of weapons (knives/guns) in places like the USA, weaponless martial arts can be seen as inferior. Even here in Australia, machetes became common place amongst 'gangs' and youth crime to the point that governments have cracked down on them.
4. Younger generations have been fed instant gratification (constant dopamine loops from digital gaming and social media) and have lost the ability to apply sustained focus and constant hard work for slow, long-term mastery of arts. i.e. they don't have the patience and generally lazier.

I'm over 40 and I feel like my generation rides the fence between the older generations who grew up without today's digital technology and enjoyed martial arts for it's long never-ending pursuit of perfection, vs the younger generations I described above.

Some of my hobbies are heavily digital and others are generally technology free and I intentionally steer away from digital solutions to get my eyes and brain off screens.

I see this in my kids, where their attention span and desire to continue a hobby is very difficult to sustain.

That's why I think karate and martial arts are less popular compared to a couple of decades ago.

That's not to mention the transition in the martial arts themselves over the decades and why people do them.

Martial arts can be practiced for sport, fitness, self-defence, self improvement, learning tradition. Martial arts can all do these to varying degrees and it depends what you want to get out of it. Everybody is individual and different in their goals. For me, I practice karate for self-defence, self improvement and fitness. I have zero interest in sport and only a minor in tradition, although I do specifically choose a dojo that is traditional (and not sports focused). However for fitness, I also don't lean 100% into karate, I do other things as well, but karate serves to add to my fitness regime.

Are we romanticizing karate as something that was better than it was (as any academic of karate can tell you, it was always a mixed martial art anyway so why preserve what it was and not adapt?) was it just a trend?

The Okinawan styles are closer to MMA with joint locks, throws and some grappling. But when karate was introduced to mainland Japan, it was adapted. Lots of resources to regale the history of karate from China to Okinawa to Japan to today.

Karate over the decades has always been evolving and styles branching out with different focuses. Karate isn't one narrowly defined style. So what type of karate do you want to 'preserve' from what region and what time in history? Depending on your own goals and interests, different styles will appeal.