The success of homeopathy is a hot debate topic in the history of medicine. I personally haven't studied it enough to form an opinion one way or the other, but I do know the general positions that historians have taken over the years to explain the success of alternative medicine in the nineteenth century:
The idea that a particular treatment is somehow more "natural" has always had immense appeal, and homeopaths (and other alternative practitioners) were careful to use language that implied that their practices were a purer version of Galenism. Even the word "alternative" is Galenic, referring to a type of medicine that restores balance to the body.
Homeopathy was not as far removed from mainstream medicine as the label "alternative" might imply. Both streams, by the mid-nineteenth century, put emphasis on hygiene and gentleness, arguing that medicine minimally should be used to help the body heal itself. That being said, this was not a perspective necessarily shared by all members of the medical profession, especially surgeons, some of whom were quite keen on the idea of drastic interventionism (although they, too, were taking a more minimalist approach by the end of the century). Point being: as you mentioned, homeopathy may have been popular because it was comparatively gentle and ineffectual.
Biomedicine is noteworthy for its comparatively impersonal approach to the patient. Alternative medicine tends to be a lot more patient-centric, putting emphasis on shared knowledge, close personal relationships, the patient's self-narrative, and a collaborative approach to health that is more akin to a pre-biomedical "bedside medicine" paradigm than hospital medicine. This feature made alternative medicines especially popular among women, doubly so because they could actually practice as alternative healers.
I'm a little dubious about the proposal that homeopathy was popular because it was less effectual than mainstream medicine. By the time alternative medicine became popular, medical understanding of human biology and pathology had actually improved by leaps and bounds, although for the first part of the century at least, therapy had not caught up to theory. Furthermore, there was a professional "push" throughout the century to make doctors more trustworthy, which seems to have been largely successful. In general, alternative and mainstream medicine shared more practices than either liked to admit, both in claimed historical antecedents and in practice.
But that being said, this is definitely a controversial subject, and I'm unwilling to commit to one theory over another. From what I've read, "alternative medicine worked better because it didn't work at all" is a slightly older historiographic approach, and it is more popular nowadays to make a case for the "alternative medicine is more patient-friendly" perspective.
A good overview of nineteenth-century alternative medicines can be found in Norman Gevitz, "Unorthodox Medical Systems," Companion Encyclopedia of the History of Medicine, ed. William F. Bynum and Roy Porter (London: Routledge, 1993), vol. 1, 603-633. I would especially emphasize part of his conclusion, with regards to my belief that early nineteenth-century medicine was not really "that bad":
"A number of present-day historians…have noted that in criticizing the worst aspects of standard orthodox treatment, by their success in attracting patients, securing the support of some orthodox physicians and offering, in general, a safer therapeutic regimen, homeopathy, eclecticism, and hydropathy pushed regular practitioners to abandon their heroic approach. Recently, however, Warner presented statistical evidence that orthodox physicians in America were decreasing their dependence on bloodletting and mercury much earlier in the century than generally believed, and argued that other, more orthodox theoretical currents and innovations accounted for much of the regulars' change in approach."
Finally, for a summary of theory number three (which I find particularly intriguing, and will probably read into more after today), check out Don Bates, "Why Not Call Modern Medicine 'Alternative'?" in Perspectives in Biology and Medicine 40 (2000): 502-518.