Quick analysis of why Touhou is popular using Hiroki Azuma's analysis of otaku culture:
Modern wotaku culture is based on elements of moe. Modern wotaku love elements of moe within things but they do not fall in love with particular stories or "grand narratives" anymore. Wotaku are addicted to what Azuma terms "simulcra" (a piece of or element of something or a recreation a "simulation" of something, but not a whole narrative).
That is to say, the original Gundam had a very clear canon story that could not be altered. In modern times we have many off shoots of Gundam, both canon and not canon. For modern wotaku the "truth" of a particular storyline is not important, what is important is the fact that there are Zakus, Gundams, Princess characters, Amuro characters, etc. etc. The pieces or "simulcra" are what the wotaku directly look at. If a series or doujin or story has enough of these elements it will be popular with wotaku. This is why things such as Kanon can become popular. The characters and story within Kanon is all pulled from the "moe database." It is so generic and such a compilation of these elements that it becomes immediately popular. It itself is created as a doujinwork which itself is already in some sense "noncanon."
Using this idea, Touhou is the granddaddy of simulcra. There isn't even a real story behind it. The entirety of Touhou is created, even the modern representations of Touhou characters are not the originals, but it doesn't matter. That's WHY it is so popular. The original game contains a bare minimum of ANYTHING other than simulcra. The original drawings are completely ridiculous, but they are moe elements boiled down to the most simple possible form. A form which can be expanded and changed and recreated by different artists, and take on even more value because of that.

That is why Touhou is popular. I did a horrible job explaining it, but read Hiroki Azuma's book for a more complete picture (which is actually written BEFORE Touhou, and basically predicts it).