From my own experiences of rugby union at youth level in North Wales, I`d say you`re pretty much spot on about the rise of the premier league and footy in general.
My lads played in multiple tournaments over the years in North Wales, in areas that used to be hot beds of rugby. Those areas where every little village seems to have a rugby club and if not. at least a pitch and some posts. Just like League used to be in the North of England ( still seems to be the case in West and North Cumbria )
Apart from Mold RUFC, the standard of the teams was pretty poor and Mold were only decent, as there was a good public school nearby, where they played a good standard of rugby and a lot of the boys who went to that school played for Mold.
From speaking to various Welsh coaches and parents over the years, they all said the same thing, the majority of kids weren`t interested in rugby over footy. Unless they played rugby at school or their dad / uncle / brother played, they just didn`t play at all.
I`ve no idea about South Wales, as we never got that far on the our travels,, but from what I`ve read it`s pretty much the same their too.