Most people realize exactly what the quote is talking about, since the alternative (removing stuff until you're left with nothing, or with something barely working) makes no sense if the goal is perfection. Part of the appeal of the quote is that you have to make this realization. Just like a joke would lose its appeal if it was preceded by a list of assumptions that would explain the joke.
The problem is that what you describe is not the alternative I've heard before. It's not that you'd remove things to nothing, but rather that you don't add something that is necessary or beneficial, because there's this belief that adding things is bad. I hear this from a lot of college grads, who apparently read a blog that talks about this, or maybe read this quote.
My point is you don't add stupid stuff, but you don't blindly say not to add something, and simply look for things to remove.
I guess I just never met anybody who didn't understand the quote. To me it says: Think very hard about what to add, and think very hard about what to remove. Of course, I realize that those who take the quote literally are not going to think very hard about which features to remove, and I'll agree that you're more likely to succeed with a product that has lots of thoughtlessly added features, than one that has none. :)
