Yes, the reduction in tax drag due to pulling down the taxable balance is an important part of the return of doing Roth Conversions, especially if you do them early so the tax drag reduction has time to compound.On the flip side, Mike Piper in his Bogleheads talk on Roth conversion points out that there is an effect in the opposite (positive) direction - selling taxable to pay for Roth conversions effectively shifts assets from taxable to Roth, which means that money goes from a tax draggy account to a tax free account.
The effect is probably small in most situations but does compound over time. His argument is that this effect is a reason to Roth convert even when rates are equal.
I think it would depend on the tradeoff between how much in cap gains you have to realize vs. the ongoing improvement in tax drag effect.
Personally the only thing I have left in taxable is Vanguard index funds I bought in October 2016, so my unrealized gain percentage is over 50% now. So it's starting to be something I've noticed. I'm still doing Roth conversions though because the arbitrage and my remaining life expectancy means it still makes sense.
Over a retirement it can be the same as converting at several percent lower tax bracket. Roth Conversions can also reduce tax drag later if RMDs beyond spending needs would otherwise be arriving in taxable.
Plus of course, Roth assets stay out of your heirs' taxable accounts for an average of another 5 years after you pass.
So there are lots of small sources of return that add up to a significant boost that folks often overlook. As you are now experiencing with having to pay increasing capital gains taxes, there are also some sources of cost you have to account for too.