Perhaps it was true for airlines, but mind you that airlines were a substantial upgrade over railways in terms of travel speed, so it's not just about vacations. "...is there a particular reason to believe that the average American wants to live in a desert..." yes and no. With the rise of "alternative lifestyles", i wouldn't be surprised if people would begin exploring the cheaper to purchase lands for development. And while, obviously, most people aren't going to live in the desert, the technology that would be developed and used could benefit in areas other than "supplying those desert weirdos with water". Alternative ways to obtain quality water to me are just like what airplane travel was in comparison to railways.

take a look at arizona real estate prices over the past couple years

people want to live where it’s sunny and warm

I'm not denying that there are people who want to live there. It's obvious there are (and that there are growth trends, particularly as snowbirds seem to be discarding Florida as their first choice).

The dispute is about scale: a couple of million retirees equal a lot of speculative housing value, but they don't justify a megaproject to deliver water to the middle of the desert. That would require population migration on a scale not seen in over a century in the US.