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Firstly, even releasing the limited tools they have now, Bethesda have gone above and beyond most other developers. Secondly, multi-million dollar budgets and smaller profit margins are what happened to the good old days of free everything. The MMO 'model' you outlined has very little to do with MMOs. Doom (the very first one) was redone as Ultimate Doom, which had a couple of new scenarios. Final Doom followed some time after. Each had an extra price tag for basically what fans had done. Wolfenstein had a similar model.
Patching bugs is an iffy situation. I'd rather put up with a jerky Oblivion in March then having to wait until June for some minor, stubborn bug fixes. On the inverse, I'd rather wait for GR:AW to have decent netcode. It depends on the issues involved. Monthly subscriptions to MMOs originally came round due to the massive costs involved in hosting them. Consumers accepted these and Blizzard et al are just continuing the trend.
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"'There's a tendency among the press to attribute the creation of a game to a single person,' says Warren Spector, creator of Thief and Deus Ex."
-- From an IGN game review.
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