In my opinion, the issue isn't the parade per se. The issue is that particular parade route in that particular park at that particular time of day. Main Street was the primary parade viewing area, the primary fireworks viewing area, the primary shopping area, the only entrance route into the park, and the only egress route out of the park, and the demand for four of those functions (parade, fireworks, shopping, and egress) all peaked within the same hour or two every night. It was too much in the same spot all at the same time.
Is Disney still developing a "backstage" egress route behind the Main Street buildings? If so, I think that's the piece they need in order to make a nighttime parade viable again.