For me yes, for others it's a toss up. When I was a kid I would always rent a game before I owned it.
A good example is the free weekends on steam. They are awesome and with the free weekend trial of whatever game they throw up sometimes it has gotten a lot of my friends to buy the games they wouldn't have necessarily looked at.
Like you said if someone who is excited for the game thinks the demo sucks they might pass it up, but then they should check out reviews, forums and see whatever else on the game. Sometimes the demos just suck compared to the full game too.