I think the Japanese have missed the boat by not selling decent dirt bikes that are street legal. AFAIK, the KTM and Husky dealers locally are doing pretty well with their road-going dirt machines. Let's ask NM Trailboss on this one -- he works for a multi-line, multi-shop dealer and would know if street papers help.
The main advantage I see here in the US is that trail mileage is being lost on public lands, and if your bike is street-legal it makes it easier to string together a good trail ride. If KTM brings this Freeride here with road-going papers, I don't think they'll languish in the showrooms.