That's the operative part. If you went out riding for a day, you'll be amazed at just how often you need to move out of a marked bike lane. Glass, gravel, broken plastic, water, pot holes, uneven surface, and most importantly, opening doors of parked cars.unless it is impractical to do so (eg glass in the bicycle lane).
They're also not wearing lycra because they're trying to emulate Lance Armstrong. They're wearing lycra because they're going on 50-100km rides, and it's by far the most practical and comfortable attire for the kind of riding they're doing. Just like if you were to jog to a shop, your normal clothes are fine, but if you were to go for a proper run you're certainly not going to head out in your jeans are you.
The increase in numbers is partly down to the number of visitors from interstate, many of whom bring their bikes, as well as people who have the week off and are going on training rides for the community challenge on Friday.
The safety factor is a big reason why they do take over the lane when riding in a group. If they were to ride along the gutter, cars tend to try and pass while sticking in their lane, often leaving only a very small gap. By taking the lane, it forces traffic to purposely change lanes to pass, thereby passing with a much safer gap. Trust me, the more you do the "right thing" and stick religiously within the bike lane or to the hard left, the less room drivers give you.