I'm too old to know much at all about how "big" drag racing was during the musclebike craze, but even though I never witnessed it firsthand, it seems like it was massive BITD. I think, the muscle-bike type bikes that were popular in the early 2000s reflected that kids had a custom motorcycle fantasy, and they were selling bikes around that. I'm thinking, late 60s/early 70s, with all the negative press the Angels were getting, and the "outlaw" nature of motorbike clubs being generally frowned upon, kids probably didn't aspire to a custom moto as much as they would to a crazy-powerful car, built for the drag strip. The styling and ad copy for the bikes would have reflected this...
BMX "killed" musclebikes? Yeah, there's a valid argument behind that, but the first bmx bikes were home-modded musclebikes. Then, the big companies started making BMX-flavored versions of musclebikes, before true purpose-built BMX rigs became popular. Arguable, BMX evolved from musclebike DNA. It's kinda like saying H-o-m-o sapiens killed the Neanderthal man, which is kind of true, but it's just part of progress.