In all the years that I've been commuting to work on a bike, I've heard the range of reasons from co-workers why they don't bike commute. Number one was fear of traffic, followed closely by lack of time or showers. I don't ever recall someone saying they wouldn't ride because they were afraid they'd have to wear lycra.
Most people already know they can ride without lycra. They've always known it. The "lycra scares people away from cycling so we'd better not wear it" argument is bogus.