Nevada has had a long history of switching its largest population center: Chinatown (modern Dayton) in 1850, yielding to Genoa (early 1850s), to Virginia City, 1859, to Reno in the 1890s, to Goldfield, around 1905, back to Reno around 1915, and then to Las Vegas in the late 1950s.

Reno was the first to benefit in a big way by the 1931 legislation (designed to counter the effects of the Great Depression), which legalized gambling and made divorce even easier to obtain in the state. Reno regarded itself as a university town and did not initially embrace its the gambling persona as enthusiastically as it might have. In addition, Northern Nevada can have harsh winters - the effect of which is to cut off the passes that lead from the Bay Area in California to Reno. So there were lean months every year.

Las Vegas, platted in 1905 (although there were earlier settlements in the area) benefitted, as you say, from the Boulder (aka Hoover) Dam project. This brought a new growth in population, but it also resulted in cheap electricity and water. Basic Magnesium also thrived in Southern Nevada during WWII. All this meant that Las Vegas was positioned to boom after WWII and with the introduction of cheap, easily accessible air conditioning. Add to this the easy access to California's largest population center, and it was in a position to outcompete with Reno.

Reno did not lift the "redline" restrictions that kept casinos boxed into a small district until the early 1970s, at which point there was some growth, but by then economic diversity had positioned Northern Nevada in a different direction, and the preeminent position of Las Vegas gambling - and its enormous population - were not to be challenged successfully.

There is a great new history of Nevada, just released by Michael Green, which provides an excellent overview.