Rich, I think you need to rethink some of your facts. While the Mustang II has been vilified over the years since it was replaced by the Fox body for the 1979 model year, the fact is that over its four year production run from 1974 to 1978 Ford sold 1,107,718 Mustang IIs. During its first four years from 1979 to 1982 the supposedly more popular Fox body sold 954,228 units. I would hardly call either of those a sales "failure". The Mustang II was the right car for the time. I witnessed those years. Everyone had lost interest in muscle cars and the insurance companies made sure everyone's interest stayed low. We had also just suffered through the Arab oil embargoes and the resultant steep rise in gas prices. If anything, the Mustang II allowed the Mustang to survive with no interruption in production for what will soon be 50 years, which is a record. No other production car can match that and I think it is an important part of the Mustang mystic and something for fans of the brand to be proud of. I was never personally a fan of the Mustang II but it is an undeniable part of Mustang history and it is a pretty accurate reflection of the automotive market place at the time.
Something else to consider: in the previous four years before the Mustang II, from 1970 to 1973 (the last year of the "classic" Mustang) the Mustang sold 601,054 total units which is 506,664 units less than the four year production of the Mustang II.
Source: MUSTANG by Peter Henshaw copyright 2006