That said, the article may be mistaken in the sense that the research, while applicable to pilots, appears to have actually been motivated by his work with patients suffering from dizzy spells. (BTW, he received the 1914 Nobel Prize in medicine for this research).
According to a 2004 study, the average life expectancy of a non-instrument-rated pilot who flies into clouds or instrument conditions is 178 seconds.
At that rate, I'd imagine it didn't take long after the first plane flight for pilots to notice that there was a big problem with, say, closing your eyes or otherwise getting distracted while flying. Or perhaps a pilot or two tried flying into a cloud -- it's the sort of thing you'd try to do if you could, right? -- and their remaining colleagues then started wondering why flying into clouds was such a sure-fire way to die. Death sure does have a way of crystallizing such questions.
The other point I'd make is that fixed-wing aircraft research probably had obvious potential military applications even in the prewar age of 1906. Perhaps this research was funded so early for much the same reason that astronaut-physiology research was well funded even before the first astronaut reached low-earth orbit.
Remember, the Wright brothers first flew in 1903.
As another reply points out, it was likely blimp, balloon or some other form of aviation that spurred the research on vestibular effects.
Europe definitely didn't believe it was a hoax, in fact there were lots of people working at attempting powered flight.
That does not diminish the accomplishments of the Wright brothers in any way, but to make it seem as though Europe did not believe powered flight was possible is not true.
http://en.wikipedia.org/wiki/Aviation_history
The time was simply ripe, lots of the bits and pieces had been developed by those that had gone before, such as Lilienthal (who built some pretty amazing gliders) and many others.