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Well, really, musicals on film are not a strange phenomenon at all. Opera has been around for *quite* awhile and musical theatre is sort of a natural progression from that. Film is basically taking what is done in theatre and conveying it through a different medium, so it's only natural then that musicals would then be placed on film as well. I don't think the decision to do so is any more involved than that.
Now, as for the style of some of these older movies (and musicals in theatre) - the happy-go-lucky kind of feel they tended to have - a lot of that comes from who was doing most of the work in film and broadway at the time. There's not a stereotype of Jewish Hollywood for nothing. This is where a lot of Jewish immigrants were able to find success and, so, what they tended to create was their image of the American dream - in some ways how they saw America (through the eyes of their success) but in most ways, how they had hoped America would be.
I once saw a very good documentary about this actually (Jewish immigrants and Hollywood) - I wish I could remember the title to recommend it.
As for musicals dying out, the only logical answer is that they won't. Musicals will always be placed on film so long as musicals are being performed in theatre. And musicals will be performed in theatre so long as there is music to be performed.
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Le temps détruit tout
"Musicians are the carriers and communicators of spirit in the most immediate sense." - Kurt Elling
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