As a former event rider, I have ridden in my share of group lessons - not just as a beginner, but as an Advanced Young Rider. Trainers like Jimmy Wofford, David O'Connor, etc... would come teach clinics in our area and a lot of people would get to ride with them. Sessions were broken up by level and by the end of the longer sessions you were glad to be sharing the attention, so you could take a quick break.
As a former Intercollegiate Dressage rider, I took a weekly group lesson with Becky Schurink at Mount Holyoke College. We followed up with private lessons during the week and then I rode with part of the team every Friday morning. As my instructor, Becky knew what I needed to work on and Friday's group allowed her to correct me and give me the time to practice it on my own while she worked with others.
In my experience, group lessons allow for many things:
1. Increased numbers of people gaining access to a desired trainer's schedule and/or during ideal riding times.
2. Independence with the students, as the attention can't be on them the entire time.
3. Cheaper rates for the students and increased income for the trainers.
4. An increased ability for a student/horse to ride with others in the ring, building their awareness of surroundings and increasing communication lines - both great for show prep.
Sure, you don't get the personalized attention of a private lesson. However, if you can't pay for full training or your trainer doesn't have time in his/her schedule to fit in a full training package for you, group lessons are a great alternative.
As a current dressage trainer, I still wonder why it is so rare in the dressage world to have group lessons. The USDF Instructor's Certification required that all Certified Instructors teach a group lesson in their Workshop and the Final Exam - until it was voted out this winter. My feelings are torn on this - I was able to sharpen my skills when I taught the group lesson at the Workshop, but I have never taught a dressage group lesson in any other situation. So, I am not sure how relevant the dressage group lesson is until there is a major culture shift (at least in my Region) that starts up a demand for groups.
All I can do is encourage my students to take group lessons and reflect on "the good old days" when I taught/took more group lessons than I can remember.
(Incidentally, I do recall a lot of them involving work without stirrups until my legs got blisters. Maybe that shared experience is what has put people off?)