I think that quite simply we are a "brand name" status conscious society and D-1 is perceived to be the top of the heap with anything else a consolation prize.
My son is at a D-3 and many of his peers through HS/travel/scout team play are at D-1 schools. NEVER heard of a fellow player question his decision, but many parents have asked why he "settled" for d-3
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Given that he is at a school he absolutely loves, a school typically ranked in the top 5 academically of all liberal arts colleges in the country, a school with a great staff of coachs, amazing facilities etc. etc. I can't imagine him in a better place. Frankly, I don't think he ever seriously considered the division the school played in, but, instead, all other factors that made the school and baseball program what they are.
D-1 IMO is certainly, in general, a higher level quality of play, deeper pitching, deeper rosters. You play about 60 games in D-1 as compared to 40 in D-3 and there's that athletic money. Its the biggest and best package and, again, to many people anything else is just "less" and unacceptable.
Also, d-3's are typically perceieved as only "academic" schools, but there are "academic", "jock" and "party" schools etc. at every level.
In any event, while there is no athletic $$$$ at D-3 most any school has need and merit/academic based $$$$.
From my observations, D-3 programs are scouted and players work just as hard (practice time etc.) and the programs are no less serious about things then D-1 or 2.
At the bottom line I think is the very simple concept of finding YOUR best fit. I learned that notion from this site and while it seems such an obvious concept, I don't think it really is. The division is only one factor of many that determine where you belong, where you will be happy, where you want to go to school and where all of your college experience will best play out.
For many, the biggest/best brand name is assumed to be the best choice and I guess for many it may well be, but considering all options, and many d-3 schools present great ones, would serve most quite well.