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Sanyo has been able to sell those HD1s and HD1as for the following reasons.
1. The non-H.264 MPEG-4 files can be played and edited by existing software.
2. The buyers often are only copying the files for playback and not editing those files.
If those types of users could get their hands on a camcorder that records to a superior codec for better image quality, and if these VC-1 files could be played on most computers in use today, then it might work.
You know, for that type of use; for people who are just recording video of the kids or birthday parties.
Sanyo is clearly targeting women, in my opinion.
Their marketing is quite clever.
They offer cute little camcorders that can fit into a purse and come in different colors:
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