On the flip side a) we *should* (on the basis of the resources we have at least) be competitive and b) isn't it natural to start any season convinced that *this will be the year* - even if that only last for about 10 minutes!
We have just had 3 out of the 4 places in European finals, the Premier League is the world's richest, we have one of the deepest professional league structures in the world.
I know none of that really means much, but on a simple level, it's mental to think that Iceland can beat us, Scotland can outplay us and so on and so forth. We're a relatively large nation as well. How do Belgium do it with a fraction of our population? (Not just now, they were really good for a period in the 80s as well) - how have Sweden qualified again and again and again and again and done quite well with some regularity, even though they've got a fraction of our resources. Croatia! How on earth? That's smaller than Scotland!
I think we all fall for the hype, but it's one of those things. It doesn't make sense that with all the domestic successes in Europe, that our national team hasn't reached a final for 50+ years. One year, it feels, we must do it.