The problem imho really started in PS1 and PS2 gens.
FF7 was the game that brought RPGs in the mainstream, but aside from the FF series in Europe we've had bizzare releases. we never got Chrono Trigger (until recently), Chrono Cross, Xenogears and probabily a good few RPGs in the PS2 gen, so the genre never took off here like in the US.
the other problem is the general opinion of JRPGs is that they are childish, or imature, with ridculous 'fan service', teenagers or young people arnt interested in games like that - they basically want action like GTA or COD. we never saw that side of JRPGs, we only tended to see the cutscene side, which didnt paint a very good pictures. turn based battles generated the preconception that RPGs were boring, and tedious. however things are changing the transition into real time, like The Last Story might be the answer.
however things have changed profoundly. and while JRPGs may not be taking off here like in the US, there is a small and changing fanbase that has adapted to the style and the style has adapted to them. voice acting tends to be a lot better, Dragon Quest has embraced the age of online gaming (and its very successful for a JRPG in Europe) and the dialogue - tone has matured, eg Valkyria Chronicles, Dragon Quest 8, FF12.
even if JRPGs are not successful here ever, games like Mass Effect, Dragon Age, Fallout, Oblivion and even Demon's Souls are making great inroads into the European market, perhaps those games can reignite the success Square found with FF7, but never reached again here in the west.
