Fair point. Higher signal in = higher signal out
So accepting that there is more stuff going on after the sensor in terms of turning it into a picture, if the basic raw material that you're working with is only 30-40% of potential, what happens to the other 60-70% and what can be done to regain it?
Going back to the OP and the premise that more pixels is not good for image quality, I'm not sure I accept that at face value. More pixels simpy means the image in sliced and diced into smaller component parts, which can't be a bad thing for detail, but the (alleged) downside is that there are other losses that go hand in hand with it.
Frankly, I don't know. Off hand I can't think of too many cameras that have come out with more pixels but significantly worse performance in other areas. Somebody might point to the 7D vs 40D or something (18mp vs 10mp) but I'm not sure that's even true and certainly not conclusive or significant. My own tests showed the 7D to be better all round, if not by much.
Maybe a moot point, but generally the experience seems to be more pixels and other aspects of performance maintained or improved, one way or another...

Isn't that the trend? We certainly don't see too many people snapping up discontinued models to get improved IQ. I don't want any of my old cameras back!