Current non-spam demand for blockspace is probably 1% of the available supply across all L1s and L2s, yet the crypto world is still obsessed with L1s and L2s. Why is there not a massive push towards applications to fill said blockspace? Please make me understand why I'm wrong and what I'm missing?

Blockchains need to scale by millions of times to support  mainstream apps. If you build something successful now, your app will saturate all capacity by itself. Example for a simple use case:

Blockchains need to scale by millions of times to support  mainstream apps. If you build something successful now, your app will saturate all capacity by itself. Example for a simple use case: http://highscalability.com/blog/2016/11/14/how-urban-airship-scaled-to-25-billion-notifications-during.html