As long as the animation style was abstract enough, the absurdity of that idea worked. But as Disney animation became more realistic, it became more and more untenable.
Over the years, Mickey underwent a design evolution, including a major redesign by Fred Moore for Sorcerer's Apprentice. The effort to make him and Minnie more dimensional and emotionally complex came with a price, however, because they became less believable. There was always the problem of those abstract circular ears, which did bizarre things on head turns.
Audiences eventually lost interest in the character, despite efforts to make him the official mascot for the Disney Studios.
Toy designer and Mickey collector Mel Birnkrant puts it this way:
"Mickey disappeared because of Disney's push towards reality, which wrecked a lot of things in my opinion. As [veteran animator] Ward Kimball explained to me—and this is the inside story—all of Disney was steering a course towards reality. And it got to a point where the story men, as well, could no longer swallow the existence of a three foot mouse. They could believe in Donald Duck as he was just large enough to exist in the human world (think Three Caballeros). But Mickey no longer made sense to them."
"The absurdity of the situation is no better illustrated than in the post-Pinocchio cartoon when the kitten Figaro was developed to a new level of realism. There is a scene in which Minnie is giving Figaro a bath that is utterly surreal."
("Bath Day," 1946) Link to YouTube
"Mickey and Minnie interacting with small kittens was a recurring theme in the early days, but there was no such thing as reality back then. All the characters were abstract."
Disney Studios has recently attempted to revive Mickey as a more abstract (and sarcastic) character in short films for the internet.
Previous Post: How Tall is Mickey? (With the weird live action clip of a monkey in a Mickey suit)
Deja View Blog: Fred Moore's Mickey Sketches
Mel Birnkrant's Cartoon Character Collection
All art ©Disney Studios