I don't disagree with your comments regarding quality, but I think we need to examine some key points here.
As a customer, if you put two apps in front of me - one is free with DLC and the other is $99 but includes everything, I am going to choose the freemium app 9 times out of 10. If the full-price app is the only one available, I am less likely to jump in due to the risk/reward ratio ("That's a lot of money for an app I'm not sure I'll like...").
As a developer, I would rather have 9 free downloads of my app with a couple hundred dollars worth of DLC purchases than 1 download of my full-price app.
As Apple, I prefer whatever method customers prefer and are willing to pay for. Why argue with consumers if they are happy and you are still getting your 30% cut?
In the end, the market will determine what is acceptable. If people stop buying freemium apps and upgrades, then developers will need to re-think their strategy. Just realize that there are a lot of folks out there with iDevices that can't jump at every $20 app they see. Freemium makes sense for a lot of people.