Oh how I would have loved to be part of that gathering
But you're right, the C5 was coming and it had much more potential. I drove a '93 ZR-1 next to a C5 and I always felt that, despite the pure raw hair raising power of the LT-5, the C5 was so much better on so many levels. Better feeling with the road and it gave much more confidence to really drive it. I drove the Z close to 170MPH once somewhere in Germany and the car really scared me. Did the same with the C5 a year later and that car really gives you confidence (although it's still a bit scary :L ).
One thing I will never forget about my ZR-1 is the absolute brute force that car has, but above all the sound. The high revving engine in combination with my Flowmaster exhaust results in a sound that no other Corvette can create. It's awesome.
If the decision came as early as 1992, then why was there a gen III LT-5 in development? I can't find any info at the moment, but I seem to remember reading about it somewhere, that it reached quite far in development resulting in a running prototype.