Overall league attendance was down. Your questions omit information.
Is it dumb to improve your last place team in a stacked division and become a mediocre team?
You yourself said it. This is a 40 win team. Tell me, how do you want to make this team contend this year?
If you admit that we won't contend, would you rather receive a high pick or a lower pick in the draft?
Would you rather continue stalling young talent in the minors and be in a position were we have no controllable MLB talent, a higher payroll, and lesser opportunities to acquire young talent?
Nobody wants to watch a losing team. But I think us fans want a championship more than we don't want to watch losing. If losing is what will take to turn this franchise around, so be it.
The true "incompetence" would be to change nothing. You say that a lack of acquisitions is incompetent. We have acquired a multitude of cheap young players with some upside. We are rebuilding two key aspects of a successful franchise(analytics and international scouting).
BTW questioning the extent of a person's fandom is absurd. Are we not all on the same site discussing about the team that we all love? Do you really believe anybody on here wants to see the orioles lose?