The simple answer is that you could have some metric that would keep the evolved content in balance, but I think your question points to a more significant point:

What you say would be true if everyone was focused on making the most effective killing gun, but is every player going to do this? How many people play WoW with the explicit intention of being the best player on the server? Personally, I played WoW because I had personal friends who played and I saw it as an opportunity to keep in touch with friends and have fun. Other than the social aspect, I enjoyed novel content, especially when I discovered the novelty myself. If this game can allow me to create fun and interesting guns ad infinitum, that is a major breakthrough in game design.

I think that this particular game is maybe not the best example for this technology, because you are evolving weapons to kill other ships. It might be more to the point if you could evolve your own art, as was done with Picbreeder ( http://www.picbreeder.org/ ) Even still, I do not think that every player in a game like this will be hell bent on making the content that makes their character the most powerful.

The reason why the games industry isn't as creative is because there's too much at stake. Think back to all of the games for the early ATARIs and Commodores which really sucked. All the tons of games which were totally worthless and not even remotely entertaining. For every great creative masterpiece there were tens, even hundreds of games which were just a waste of time. Game companies now aren't willing to bomb ten times to get one great game because a single game can cost in the millions of dollars.