Great discussion! Lots of useful information.
I'd like to share my experience.
I've got a mid-2012 11" MacBook Air. Spends 99% of its lifetime on AC power 24/7.
Mostly light workloads (web surfing, iTunes music playback and a bunch of other programs that mostly sit in background and create no significant CPU or I/O load).
It literally exported under 5 small iMovie projects in the past 8 years of service and that was by far the heaviest workload it experienced.
Went through a couple really hot summers (not Australia hot summers, though). Fullscreen 1080p YouTube videos stuttering hot summers. Or maybe that was bumpy road to HTML5 in Google Chrome.
Anyway, 5 years into the service, battery swelled like crazy.
Gradually, slowly they started to deform aluminium case to the point when the lid wouldn't close tight and keyboard started to look and feel swollen as well.
Never thought it was a thing. Didn't know much about Li-Ion batteries, though.
Additionally, it has never been cleaned in those 5 years.
I didn't babysit the battery. I didn't bother to clean it. Otherwise, I didn't overheat it and tried to use it sparingly in terms of throwing heavy loads at it and subjecting to detrimental ambient temperatures.
Shortly after the battery was replaced CPU fan went out.
Personally, I don't care much about reduced capacity as I know I'm going to use it 99% of the time on AC power. If it can hold out for about an hour on a battery once in a while that's all I need.
However, what I do care about is whether my batteries will get bloated and break other components in my MacBook or, you know, set my place on fire when I'm sleeping.
The first one, a 2010, had the battery bloat badly, warping the case, in about 2 years. The keyboard and trackpad wouldnt work anymore but i had external input devices and kept using it till about the 3.5 year mark and retired it
You're not alone. Same experience here.
Since we are sharing anecdotes. I use my Mac portable very similar to you. Attached to an external monitor and running 24/7. Probably six or eight times a year I use it as a portable on battery for a trip.
I used a 2012 MacBook for two years like this with zero problems and good battery capacity when I sold it. Then I used a 2014 rMBP the same way for two years and it also had good battery capacity when I sold it a couple weeks ago.
Well, glad it worked out better for you! In my case it nearly destroyed my favorite little MacBook
Battery bloat is expected if the battery has been used for some time in deteriorated state (that's why there is a service your battery warning). But I certainly agree that it shouldn't happen after 1.5-2 years...
Curiously, in my particular case, I never saw the "Service Battery" warning. All looked normal but the battery still swelled badly.