The proof is in the pudding. Prior to the introduction of Android, embedded Linux in consumer electronics was awful and many devices often selected Windows Embedded, QNX, etc. I worked on embedded Windows in automotive devices and know first hand how a) horrible it was (slow, buggy, insecure) and b) how horrible to Linux replacements were that tried to rig up a half functioning platform.
Most small companies do not have the skills to take vanilla Linux userspace, or even Debian or Ubuntu, and build out a polished mobile platform that they can shove into a thermostat or watch. The only semi-popular Linux attempts that succeeded in volume were HTML based like WebOS, which again, simply used a fork of an off the shelf complete platform mostly built by a corporation (e.g. WebKit)
You can argue all you want, but evidence suggests otherwise. Someone building a sealed, firmware for a device today that doesn't permit third party apps, still chooses AOSP as a base more often than not, and the reason they do so, is because there is huge value in the platform. Whether you like the design or not, whether you think it is bloated or not, people think that using AOSP to bootstrap their HW lowers their time to market or costs. And for those people, they are receiving value.