You'd be right. When I started Wadjet Eye, there was a small but eager demand for CD copies, and it seemed self-defeating to not supply that demand. There weren't enough orders for me to use a CD duplication service, so I constructed and shipped all the hard copies myself.
It was a pretty good system. I only got a few of those orders a week, so I could easily keep up with them. The customers got something they wanted, and I got a bit of extra cash. Sometimes I would even sign the CD if the customer asked for it. It worked well, but... not for long.
Time went on and things got busier, and I began to dread getting those CD orders. Even though I only got a few of them a week, I found myself with less and less time to deal with them. Sometimes I would be so busy and harried that I'd almost resent having to fill a CD order. I'd rush through the process, copying a file incorrectly or smudging the ink into something ugly, forcing me to start over and get even more frustrated. I knew it couldn't last, and round about the time I was working on Emerald City Confidential and Blackwell Convergence at the same time, I bit the bullet and discontinued the CDs altogether.
I hated to do it, but I also had to face a hard truth. In the year they were available, I sold only 30 CD copies of each game. With so little demand, and as time-consuming as they were, the choice was obvious. I had to stop selling them.
But as a gamer from forever ago, I remember the sheer joy of holding a physical game in your hands. One that was actually in a box, with a proper manual (that you actually were expected to read). I hated that hard copies of my games didn't exist anymore. So I decided to try another tactic. If there wasn't a high enough demand for them, why not try and create a demand?
And lo, the "limited edition pre-order CD" offer was forged. You couldn't just buy the CD whenever you gosh darned pleased. No sir. You had to buy it NOW. Or else it was GONE. FOREVER. And it worked. The CD of Gemini Rue became a hot item. We had to hire a duplication service to handle it all. Our little apartment began to fill up substantially with all the packages we assembled.
If you ordered a CD of Gemini Rue, your copy is in this pile somewhere.
It worked so well before, that we are doing it again. We are even going all out and throwing more stuff into the package to make it a more attractive deal. So much that we had to upgrade to a DVD instead of a CD to accommodate it all. But I'll shut up about it before this turns into a sales pitch (but you should totally buy it anyway).
Anyway, that's why I do it this way. It seems to work for us, at least for now.