Steve,
It is true that bike companies are offering fewer fit options, which we both stated in our posts, but this is due to a compact geometry frame having more flexibility to fit a wider range of riders.
Now whether riders are able to get as precise a fit, well, that's another question. The manufacturers contend that you can, but that doesn't mean such a claim is true.
Taking up your example, even if a stem is limited to a range of 90-120mm to maintain handling, that should still enable nearly all riders to obtain a proper fit from a range of 6 to 7 sizes instead of say 8 or 9 traditional frame sizes.
Let's look at an example:
The Trek Madone 5.2 is available in 7 sizes, 50-62cm. Let's look at the 54 vs 56 bikes. Standover is significantly lower than a traditional frame, at 74.2 & 76.6. Thus shorter-legged riders can clear the top tube. The effective top tube lengths are 53.8 and 55.7. This difference is easily within the overlap of using a stem from 90-120mm.
Let's say the stock stem is 120 (I'm sure it is close to this). This would enable the rider of the 54 to have a top tube range from 50.8 to 53.8, on the 56 it would be 52.7 to 55.7. So there is overlap. The same is true for the next model up, the next model down and so forth.
Most riders will be able to find a compact geometry frame in a size that will fit their standover, leg length, and top tube needs and do it from a shorter list of sizes.
Furthermore, shorter-legged riders will find that they can find better fits in a compact frame than anything short of a custom made traditional bike.
Ironically the same can also be true for longer-legged riders with shorter upper torsos/arms. On a traditional bike, if they buy to fit their legs, then the top tubes are too long. If they buy to fit their arm length, they have to jack up their seat posts into the sky, and the stems, creating a rather odd bike. Whereas a compact frame with a raised headset will require less modifications.
For one of normal proportions, a traditional bike line of 9 sizes would probably enable you to find a stock bike that needs fewer fit adjustments.
Here are links that support the claim that compact geometry enables a better fit:
http://www.fezzari.com/technical.htm
http://www.siskiyoucyclery.com/road/allez.html (gets their argument from Specialized)
http://gunnarbikes.com/newsletters/11-24-05.htm