Which is why firmware upgrades like how MS/Nintendo/Sony have them are a bad idea.
Actually, especially with the incredible security found on the Xbox 360, it's the only way to secure online gaming from cheaters. Software (and even hardware) can never be 100% bug free, and when problems are found, you need to be able to fix them.
For an example of cheating on an insecure platform, just look at the history of first person shooters on the PC. In the heydays of pre-1.0 counter-strike cheaters, it could get down-right obnoxious, with both actual cheaters polluting servers, as well as witch hunts that end up banning non-cheaters, and the inevitable forum flame war that results. Most users don't want to deal with that crap, they just want to blow off some steam playing a fun game.
And online gaming is definitely a big draw for console gamers these days, and cheaters ruin it for everyone. Sony/Microsoft/etc have to assume that this will translate into less customer satisfaction for the system as a whole. So they have a financial interest in keeping the system secure. Thus they all built in firmware patching systems.
So I would say it is actually the only commercially viable way to make a console these days. And, if as a by product, it allows you to roll out new features for the platform, that's just more value added, and another way to increase user satisfaction.
Rather then just small patches, a lot of them overwrite a lot of the base code.
That's not true. See http://en.wikipedia.org/wiki/Xbox_360_System_Software and you'll find that the 360, at least, has a separate file system for system updates, and the firmware that ships with the console is rarely, if ever, touched.
the makers certainly shouldn't prevent you from online play if you don't upgrade
I disagree with this for two reasons:
1. Security - you specifically want to prevent insecure clients from connecting to your servers. It seems to me that, from the end user's perspective, the most consistent way to enforce this is by simply requiring the latest version of the firmware to connect online.
2. Maintenance, performance, and overall stability - if your servers have to support multiple versions of clients, you will have a much more difficult, time consuming, and expensive quality assurance process. Plus, the combinatorial nature of thousands of players, each with potentially different client versions, means there would be a much higher chance of missed bugs, both in client and in the servers themselves. Basically, it is cheaper and easier to force everyone to a single version of the client. And because it's a closed system, it's trivial to enforce it.
And most firmware updates don't *need* to be done in the first place
But really, upgradable firmware in game consoles is just a bad idea to use.
To sum up my arguments: online multiplayer games make system updates necessary. And if you have the functionality to update, using it for feature upgrades doesn't seem like such a bad idea. It keeps the users interested, plus it can help you stay ahead of new competition without forcing the users to go out and buy a new piece of hardware, so it's actually more cost effective for everyone involved.
If your post is really just venting that Sony's QA missed this issue with 2.40, then go ahead and be mad. I just disagree with your argument that allowing system updates in a modern gaming console is a poor design decision.