A word doesn't have to be in "broad use" to be denied. That's just one possible reason to do so. What the USPTO ruled was that:
1) "Multi-touch" was a perfectly descriptive term and thus had to also be...
2) Associated with Apple due to their advertising expenditure on the word, etc.
However, Apple presented no evidence that they had used "Multi-Touch" on their boxes or stressed it in their advertising.
While I don't disagree that Apple may or may not have presented evidence that they had used "multi-touch" on their boxes or advertising, I do have to mention that Apple did, in fact, go to great lengths to promote the term "multi-touch". It was all over the iPhone web page back in 2007. I remember it have a whole page dedicated to how the tech worked on the iPhone. Steve gushed about it during the presentation.
Here's a non-perfect analogy. Dodge has an engine that they have trademarked as the "Hemi". They call it the hemi because (I think) the cylinder heads are hemispherical in shape. I don't think they have a patent on the cylinder shape or design, just a trademark on the term "hemi" as it relates to an engine.
Now, suppose I want create a new car and I made an engine with hemishperical heads. I wouldn't (and shouldn't) be allowed to call my engine a "hemi" because consumers might be lead to believe I had a Dodge engine in my car.
This is similar to Apple's assertion that multi-touch implies an Apple-quality touch screen. I could be argued that a consumer might see a Motorola phone that has a screen that's called "multi-touch" and think that Motorola used an Apple screen in it.
To me, this is the key point in the discussion. If Apple failed to properly submit the required elements to the USPTO, then shame on them.