Here's a quote discussing your very point, about how FromSoftware was pleased with the 2 Million sales "Dark Souls" recieved.  

"Obviously, Dark Souls didn't cost as much to make. I mean---Resident Evil 6 had a dev team of six-hundred. Tomb Raider had to pay for extravagant hair physics and Hollywood actors.  Dark Souls can't be compared to Tomb Raider I'm told, because Dark Souls didn't have to pay Hollywood actors or build a brand new engine---but neither did Tomb Raider. I'm sick and tired of being told that AAA games are being forced as if by invisible gunpoint to invest decadent amounts of money in their games to the point where they need to sell more copies than reality itself is capable of providing. That's not a defense, that's just bad, bad, terribly bad, bad, and terribly bad business." - Jim Sterling

I'm sorry you see the truth as "utterly riduculous" and "irritating".

THAT often!?!  i've never seen it ever.   i don't think it has ever happened.

If a game sells 2M it can't be said it is niche...

Technically speaking, a game is niche if its intended or audience of focus is small and dedicated. Its not determined by its sales although it is rare for niche games to sell as much as games with wider appeal. Thus it is an effect of its design, Niche games have small sales beccause they appeal to few number of people.

Your own quote establishes Dark Souls as the exception - it had a low budget. AND there was DLC for it, so what do you say about that? Moreover, people (at times) WANT games with bigger budgets than Dark Souls.

From Software isn't the pinnacle of modern game design, so your example falls flat.

Uncharted, Halo, Forza etc. etc. necessitate huge budgets and consequently require high sales.

True most games won't break even if they don't hit 500k.  Yet even a niche title like Dark Souls reached it easily. If you know what you're doing, take pride in making something people will love, you won't reach CoD numbers but you will gain a dedicated audience.

When greed takes over and devs/publishers want "to reach a wider audience" and make games something they aren't, and turn everything into clones of the best selling games, that's when budgets get out of control and they end up killing themselves.

Triple A titles are usually the games that need that 500k to break even; this isn't the case when you budget, something most game companies seem to have forgotten how to do.

You can push boundaries without dumping truckloads of money into games.  It's called creativity - something we're supposed to allow game makers to lack just because they want to make a game.  You can make an extremely beautiful, extremely competent and innovative game without guaranteeing being in the red.