Yeah that does seem kind of odd that there are not more kneeboarders. My guess at it is this
1) body boarding or surfing is more popular with the media so people are less exposed to it and less likely to think it is cool. Of course many take up ocean sports to look cool.

2) body boarding is easier and surfing is harder but can do mostly everything that can be done kneeboarding and more.
3) there is no commercial entity trying to promote kneeboarding.
4) I figure it is likely that kneeboarding is much harder on your knees so surfers don't grow into old kneeboarders much.
There is bodyboarding competitions where they use the drop knee stance. Another even more vacuous entity is lay down surfing or surfing with a board and no fins but not standing.