The 701 puts out 75HP and yes only about 32 ft-lbs torque, but it probably only weighs about 300 lbs. Quick, fast and maneuverable. Plus the visual appeal.....I can see this appealing to a lot of younger riders. Do pretty much anything on it except maybe really long distances. Point is this is how a younger rider gets introduced (positively) to motorcycles. Something HD has never figured out.
About KTM--I lived in Europe for a while. Yes, KTM is known as a superior dirt/adventure travel bike. Great reputation. Agree if they decide to make a street bike it will get lots of attention.