Caucuses are, indeed, less purely "democratic" than primaries. That is their virtue. They are inconvenient, requiring commitments of time and energy that are more apt to be made by especially interested voters. Thus caucuses filter out, disproportionately, the lightly committed and least informed, which is not cause for dismay.
Popular sovereignty is simple in theory--government by consent of the governed--but should not be simple-minded in practice. It need not mean government by adding machine, the mere adding up of numbers. A wise polity also has mechanisms for measuring, accommodating and even rewarding intensity. The Senate does this with the filibuster, which enables an intense minority to slow or stymie a majority, at least for a while.
Caucuses are apt to have (in the jargon of liberal jurisprudence) a "disparate impact": Some kinds or classes of people will be more inclined than others to want to, or be able to, participate.
Of course, this argument could apply just as well in theory to the general election: why not replace it with caucuses too? Will might not object to that idea, but I suspect most people would. The critical question is whether there's enough of a difference between intra-party elections and general elections to merit using a less democratic procedure for the former. James Poulos thinks there is, since parties are private associations.
But even if one accepts (as I do) that parties have the right to select their nominees however they like, the question remains whether they're better served by opting for caucuses. (Often it's a question of saving money, but set that aside.) After all, there's a pretty direct trade-off: one can empower a relatively small group of ideologically motivated activists (see, for instance, my colleague Barron YoungSmith's report on the hilariously undemocratic Montana Republican caucus), but only at the cost of excluding more casual, lower-income, and independent voters who might develop an affinity for the party by participating. It's not a coincidence that in California the Democrats welcomed all comers in their primary, while the increasingly extreme and marginalized state GOP decided to exclude independents. Even if caucuses aren't the oppressive bastions of elitism that Hillary Clinton seems to think they are (except for Nevada, of course), it's still reasonable to believe that parties stand to gain more than they lose by facilitating broader participation in their nominating processes.