I think that's kind of a big assumption to make about Johto. While the fad was dying down by around Johto, I don't think that was because of the arc itself. FaRAB usually last a year, maybe two max if a show is lucky enough, and then it calms down to where either the show still does well enough or it is forgotten. Obviously, Pokemon was able to get into the former category. Besides that, not everyone disliked the arc. I'm sure that there were plenty of people who enjoyed that saga, such as myself.
While it's true that Johto League Champions had a DVD release, it's also out of print, so it's pretty hard to find as well. They have some singles on Amazon, although they're used and I'm not sure how many sets there are for the season. Plus, they're really expensive. The first volume is over a hundred dollars. I love Pokemon and I want to have the first two Johto seasons on DVD, but I definitely don't want to pay that much money for it, especially only one volume.
That is a good question. I guess that they never really thought that there was a demand here for it, even though they have a set for it in the UK. I think that they have box sets for all of the seasons thus far dubbed in the UK too, including the two Johto seasons and Advance seasons.