but does it have dismal sales because of the computer and it's components, or vice versa

chicken and egg thing here. People aren't going to buy a computer that is "crippled". so with no sales, Apple further cripples it to keep margins up? either way, sitting stagnant with zero updates is indicating a lack of care in the PC industry
As for updating to modern CPU's. It's not just pure raw horsepower. it's also a lot of other efficiencies and functionality that comes with new CPUs and revisions.
For example, Kaby Lake brings hardware H265 decode. it also brings more performance per watt. better support for DDR4 memory, and far better thermals than previous.
Since the iMac, especially the i7 variant suffers from thermal throttling, getting the Kaby Lake CPU into the iMac's revision should b #1 priority. Especially in th 21" model where they're using mobile chips for thermals as well.
Apple has had legitimate update paths' for all of their hardware if they chose to do so. They haven't. They have chosen to let the Mac take a back seat instead.
I do agree, the mac Air is EOL. the new MacBook Pro SHOULD have been the new Mac Air, and should be far cheaper than the $3000 price tag.
the linup should essentially look like this, and be kept up to date (even with silent refreshes)
Mac Mini
iMac
Mac Pro
MacBook
MacBook Pro