There are valid points on both sides. I think there is a lot of value in finding a small core of true fans. Yes it is very hard work – you need to take daily action in marketing yourself or your band daily for years. You need to build a mailing list of your fans. I think this is much better than dreaming of being discovered by a label and having millions of adoring fans.
What 1000 True Fans really means is that you will more realistically have a distribution of fans across varying price points. So you might have songs and cds for under $10, T-shirts for $25, box set for $100, and full blown band memorabilia for hundreds of dollars. Maybe you create a home study course for guitar or drums. So will need to gather thousands of fans, some that will buy everything you produce, but others that will buy things at different price levels.