The STS is as good as dead, so the CTS having any overlap is not a concern. The CTS will not be irrelevant in two years... all of the competition is relatively new as well. G35, C-Class, 3er, IS all have been redesigned in the past couple of years. What's going to blow it out of the water? The A4 is about the only thing coming. Otherwise, we won't see anything else until ~2011 (new 3er). The STS was also not able to be considered competitive it's first year. It struggled to be mid-pack.
You are acting as though the CTS has not even come out. "They better not repeat with the CTS"... well, obviously they didn't because the CTS is without a doubt challenging for the class lead.
C&D or MT tested the CTS to 60 at 5.8, don't remember which. Who tested the Accord to 60 in 5.8? The C&D I read estimated 6.5. You think the normal person cares about .2-.6 in a 0-60? People don't race cars on the normal road most of the time. The CTS will be plenty fast for whoever is testing it, and only the real gearheads are going to care, and they'll go for the CTS-V, anyways.
Should there be something between the regular CTS and the V? Probably, but the UV8 is not ready yet, and what's the point of certifying the Northstar for a 2 years when it only has 16hp more than the 3.6 DI?
People buying $40k+ cars aren't that concerned about MPG.
"Only" going from 0-60 in 5.8 seconds and having a little bit of overlap with a slow-selling, uncompetitive product that's going to be going away soon does not make the CTS only "90% of the way to being perfect." The average person really doesn't give a $h! about drag racing in their luxury car. If they do, they get a V, M, AMG, etc.