Talent isn't all or nothing. My 1500 PR, as a DIi walk-on, was likely very similar to yours (I ran mostly 5k/10k as I definitely lacked the raw speed for the mile). Though I was clearly one of the slow guys on the team, there was still modest talent or the motivation to compete likely would not be there.
Perhaps more importantly, you may have answered your own question by mentioning "diminishing returns".If someone runs primarily for social, fitness, mental clarity, stress relief, etc., then competitiveness plays a reduced role.
Very few of us, if any, reach their absolute potential. The reasons are as varied as the whims of the wind.