Very interesting discussion.
There was a time in my life where I considered a monastic career. It would have made my mother very happy - she is one of those people who would rather see her children become monastics or other religious functionaries, than give her grandchildren. It would be for her, a great offering to the Buddhadharma. I compare her to mothers of great teachers - Vasubhandu and Asanga, Kumarajiva, Saicho - according to legend they all had devout mothers who actively supported their son's religious activities. Alas, I have disappointed.
Regarding the limited number of monks in general, I think it may come down to a question that many might not want to acknowledge. When a young man or woman looks at the prospects of a monastic career, their first question is likely to be, "What's in it for me?" (There will be exceptions - those who have had an awakening of such profundity that a monastic career seems to be the most rational choice. These are special people who have achieved a spiritual insight that makes them qualitatively different from most of the population. I'm going to leave these people aside from the discussion.) Does the monastic career path offer promise of something people want?
I think there may be a few interrelated problems. In no particular order -
1. Does a monastic career carry appeal? Are there role models that young people can look to and have a desire to emulate?
In my view, the lack of role models is a failure of contemporary monastics. I think each societal context will warrant separate analysis on this point. The Taiwanese/Chinese context Huseng describes sounds thoroughly stifling. I don't think its simply a matter of laxity in modern society - contrary to what seems to be an assumption here in this thread, that modern people are too lazy or whatever, I don't know what world you guys exist in, but me and my peers work very long, very hard hours. Its not the overwhelming amount of work that turns people off. But if you are going to undertake such strenuous work, do you get to be the kind of person you want to be? Does the monastic path offer a sufficient reward for its compromises?
In Japan, a context I am much more familiar with, I would suggest that the failure is due to the destruction of Buddhist institutions at the end of the Momoyama period and strict government control during the Tokugawa period that squeezed the vitality out of Japanese Buddhism. I also think government and aristocratic patronage had a destructive effect. The end result is a rote career path in which charisma and vitality are unwelcome. Who the heck wants to grow up to be a soul deadened ritual functionary? The reality is that many of us grow up to compromised career paths, but that is a function of necessity and circumstance as much as personal choices. I know of monks who inherited their father's temple, but when they were young, they had dreams to be other things. It was only after those dreams were surrendered that they returned to the fold to take up the family business. Not conducive to inspiring young people to the path. (On the other hand, Yamabushi and other kinds of orders that hold promise for real, experiential spiritual challenge seem to be gaining in popularity, though still very small in terms of numbers).
Breaking this down to a more primordial, existential level - What makes a kid look at a fireman, or a doctor, a lawyer, or heck, a punk rocker with a spiked orange mohawk, and want to grow up and be one? I suggest its something that the child has an instinctual affinity for as something they want to emulate, that they want to BE. What sounds like personality destroying training of the Chinese monasteries, or the family business nature of Japanese Buddhism, I would suggest there is not much to find appealing there.
2. As Bob Thurman describes it - the monastic order is about "Free Lunch". Monastic institutions are places to get a free meals and a place to sleep. The deal is, you have to abide by the rules. Ideally, you will feel a desire to dedicate your time and effort to practice, too. In socially and economically limited societies, you get a lot of people into the monastic orders. Its better than plowing fields, for sure. And you can get away with working in the kitchen and cleaning the precincts (think Hanshan and Shide). It sounds like the Taiwanese deal is oppressive. Honestly, if I want to dedicate myself to practice, I'm signing up with a Tibetan or S.E. Asian order. Or a Japanese order - From what I know, many Japanese orders will offer similar levels of support with more autonomy. I imagine that young men and women contemplating a monastic career take this into account - "Can I picture myself living this life?" Not many of us want to trade in our brains just for some rice gruel and a hard bed.
Thurman compares Buddhist monastics to graduate students on full fellowship rides. These are brilliant people for the most part who could do anything they wanted - could go and work on Wall St. and make boatloads of money. But they choose to forego those opportunities for the relative hardship that goes with a life of the mind. The question is, does the monastic lifestyle with its Free Lunch, offer an attractive career path? The life of the mind requires an inborn discipline and an instinctual priority placed on learning and illumination which one find more pleasurable than working for a wage. There are very few who would go for this - especially if you take away sex.
3. Here's another matter that I think is critical. In feudal societies, the monastic order is one of the few paths where you can advance by merit rather than birth. In market economies, this is not the case. Merit (or at least the ability to maximize the monetary value of your work) can lead to social and economic advancement. This opportunity is still a viable and attractive option in Tibetan communities that are just emerging from feudalism, compounded by poverty of the refugee; the monastic institution is one of the only ways out. I made friends with a monk while in Dharamsala. He discouraged me from becoming a monk and confessed he wished he could move to the US where he could work and make money. He was a nice and simple man, and while he really enjoyed being a monk, there were other concerns for him beyond Dharma. For the most part, the monastic career path does not hold the same promise of social advancement that it once did, and I would argue this is much more critical than most Buddhists would probably like to admit.
4. Last argument - all Buddhists, but monastics in particular, have failed to educate people on the benefits of Buddhist practice. Part of this may have been simply that most people have lacked the capacity to understand the real goals of Buddhist practice. It doesn't help that Buddhadharma has been buried under magic and mythology for centuries. Buddhism needs to come out of its ancient and medieval shells and embrace and engage the world as it is, imho. Rather than harping for some ideal past that never was, we ought to be striving for wisdom and means of making the Buddhadharma intelligible and accessible to our contemporaries. I will go even further to suggest that if Buddhist discourse does not translate into modern vocabulary of words and ideas, we will see increasing tendencies to fundamentalism in our community, and the continued decline of Buddhism as a vital movement - which will benefit no one. I am not suggesting that the tendencies in the West to milktoast Buddhism is ideal. We need great adepts who are fluent in Buddhism and modernity to explain Buddhadharma to present people and set examples of Buddhist practice in the midst of this modern world. The retreat to anachronistic enclaves is nice on some level, but to me is no different that going to Disney Land - an escape from reality. That's the feeling I get when I visited ShoalinShi and Wutaishan in China. That's the feeling I get at some sites in Japan (although there are also vital institutions as well). It further exacerbates the retreating tendency of many contemporary strains of Buddhism and what I am concerned is that Buddhism retreats so far it becomes irrelevant, as it once did to itself in India.
Hope that contributes to the conversation.