Great explanation. So summary is Harley has no interest in "roval" type racing because the market isnt there. It's just amazing that they still dominate short flat tracks I guess the Japs and Italians arent that interested in that venue so its like a stand off.
Harley no longer needs to roadrace - for companies like Ducati racing is in their DNA.
For HD the cost of competitive entry into the sportbike market would be considerable.
Having a HD sportbike line would alienate the "true Harley faithful" - see the liquid cooled VRod.
HD dominate in flat track by favorable rules.....and those crazy goddamn hillbillies are only interested in American iron.

Roadracing = huge in Europe, small following here.
Flat track = exists in pockets of America, non-existent in the rest of the world.
I believe that if American engineering wanted to build a sportbike to take on the big four they could.