This is exactly the kind of thing I just commented on in Part 1. It takes a lot of time to get a half-decent group together -- I'd say 20 minutes is underestimating it. Finding people who are the right level and want to do the quest, filtering out the idiots who won't listen and end up getting everybody killed, and replacing the 3 people who leave 10 minutes into the quest (why did you look for a group if you have to leave in 15 minutes?!) quickly adds up to a long time spent just trying to get the game started.
The fact that this becomes more difficult at low levels when popularity starts to drop is part of it, but I think the real problem is how broken most of these games are. I've put it that ambiguously because I think it's broken in many ways:
1. There are no repercussions for being an idiot. Sure, I won't let you in my group again, but with 1000 other people on the server, I'll probably never see you again. I also won't have any luck petitioning a GM to ban your ass or get back the item you ninja'd. The bad apples stay in the bunch, meaning that every attempt to make a group is going to require a lot of time picking out the spoiled ones.
2. It takes too long. As you said, it can easily be 20 minutes to get it all together. To make matters worse, you usually can't just pause the game and come back later, so any kind of interruption can make the entire session a waste. You didn't finish the quest, you didn't get the good loot, and you'll have to start from the beginning tomorrow. I hope you can book 4 hours off to try again.
3. Sometimes, you just don't want to. When you have an hour, you could go wrap up a couple of quests, but you certainly don't have time to make a group and run an instance. But the game insists that you do so: all of the low-hanging fruit is gone and now you have to trudge your way through the epic group quest. If you could just come back to it later, it would be fine, but as Shamus said, the XP and loot will be worthless soon. Yet, you're probably not powerful enough to move on to the later levels, either. You're stuck doing this quest, but you don't have time for it. This is where a lot of people get stuck and end up dropping the game entirely.
What it comes down to is that not everybody wants to be massively multiplayer all the time. But they still enjoy the game and everything else that comes with it. So they play it solo. The pretentious MMO developers will say, "Why are you playing an MMO if you want to play solo; go find something else to do," and they will quickly see their user base shrink and die. The enterprising MMO developers will say, "You want to play solo? Sure, here's 50 other things you can do by yourself. We wouldn't want to see you go," and they successfully maintain their deathgrip on hundreds of thousands of people.
Don't tell the gamers what they should be playing; give them what they want to play.