I think the opposite is true. They made the Rack mountable xServe for almost a decade.

The fact they discontinued it shows that it's clearly not a market - customers didn't want it in enough volume to justify the product.

It's not that there wasn't a market, it's that the Xserve wasn't sold in the way that companies that buy lots of rack mount gear handle procurement. If they certified specific configurations of commodity hardware for OS X and sold them through existing reseller channels as a new SKU, it would be much easier.

That said, there's probably not much of a market for it anymore since we've gone a few years without an OS X rack mount machine and people have found other solutions.