The reason is just as you said it. Irrational fear, phobia. No amount of reason can overcome it. Even if the worst happens, it isn't the end of the world. Atmospheric nuclear weapons testing didn't end the world. Besides, this is also a very very rare event.
It is physically impossible to make something 100% safe as everyone would like. There is always something else that could go wrong that isn't in the design. It's not so much economics as it is practicality that stops the design and begins the building.
Every now and then something entirely unprecedetented comes along, as this event has done, that will give us more information to put into the future designs and retrofit older designs where feasible. The future for nuclear power will be safer still.
Now is not the time to run away from nuclear power, there is too much energy available to ignore it. I'll take nuclear power over middle east thug oil any day.
I think another part of it is because credible information is not readily available to the general public. I blame the MSM and the plant operators for not seeing that it is.
Also, I don't want to hear about all the fail safes that can't fail but do. I want to hear about what is or isn't physically possible. After that, I'll make up my own mind as to what is likely and I think that's what the average Joe/Jill wants to hear.
It only makes sense (forget economical sense) to build these things (and I know they can) so that massive contamination in event of total meltdown isn't physically possible.
That may mean building reactors that could never reach the temperatures required for meltdown, by simply making them smaller.
Everything you said. I know the Japanese will not make the same mistake twice. BTTT.