The reason to go stock android is not because it offers something better, but as a cost cutting move. Stock android is good enough for 99% of your needs. Why bother wasting resources on writing software and updating. Who knows how much money they're burning updating sense, not to mention it slows down the update process. Let Google do the software and the updating. Just like they are going to do with HTC's nexus phones this year. This will translate to lower costs, quicker updates, and no more carrier bs involved. What happened to HTC's 15 day update policy? This will draw in more people, people like me that like having their phones updated. This should also lead to a lower cost device since they no longer need coding staff or at least less coding than before.
The camera will offer something equivalent to or better than Samsung, this will entice people looking for great cameras. Yes their current camera is the best they have ever made, is it as good as the GS7? No. There has to be a better value, HTC's $700 non sale price tag puts it squarely at the Apple and Samsung level.
This can be done with a $499 price tag, lower margin and higher volume sales. What else can they do? Obviously the current path they are is going to either lead to bankruptcy or selling off the phone division to someone else. I do agree with you that Samsung and Apple have dominant positions right now, but I don't think that will last forever. Those guys have expensive devices, the only way to beat them is with lower prices or better devices or both. I don't want HTC to go out of business, but they need to change some things and quick if they are to survive.