Everquest has held conventions for years at about an annual rate. Sony has never reached the population or subscriber base that WoW has and yet they were able to hold "Fan Faires" for their players quite often. The players loved it and it brought the community even closer together for those that could make the events. Sponsors helped out, but it wasn't about making money. It was about creating more interest in the already addictive game. In other words, nothing BAD comes out of holding one of these.
If the only excuse the Blizzard employees can come up with deals with loss of development time and "how much work it is! omg!", then that's a very arrogant, non-creative, and ignorant response. Blizzard makes so much money from WoW, that the cost of an annual convention would probably cost less than their booth at E3. They should hire some people to put the convention together so they "don't waste time developing" and let these people take care of everything. A convention means more media attention, more community building, and provides the players with face to face discussions from the people they worship with their $15 a month.
There are too many people that play WoW to just ignore the demand for a convention. Will they quit because of a lack of conventions? Of course not, but they and their friends may play a few extra months because of it.