dcurtis and I did the California Zephyr back in 2008 (or 2009) and the dining car was interesting as a fairly representative example of the Amtrak experience. You could tell there was still some magic there, but the china was replaced with flimsy plastic, the food was of poorer quality than what you'd get on a United international flight in Economy class, and - yes - you did have to sit next to people you didn't know.
But you could easily imagine it as a rollicking good time, not unlike a cruise ship: fine tableware and china, well appointed interior, with cocktails and wine, next to other fascinating characters. The observation car is OK and all, but it's not the same.
Millenials don't like it because the experience isn't authentic enough.