Will Shipley and Dr. Drang both wrote smart articles about upgrades in the Mac App Store. I agree with Will that the lack of upgrade pricing may discourage developers from making significant changes to their applications. However, I think there is a big part of the user base that is still getting accustomed to paying for software at all, let alone for an upgrade. There's also a risk that less scrupulous developers will offer upgrade pricing instead of fixes and patches. I think that In App Purchase already leans in that direction for several apps. Features are added to apps piecemeal through IAP rather than through core product updates.
I'm convinced that Apple's App Store has created consumers where none existed previously. I have several non-technical friends that rely on me for troubleshooting their IT.1 In the past, when I've suggested they purchase an application to solve a problem, they've scoffed and generally refused.
"What? $10 for an app that will recover all of my lost music? No way!"
To be fair, these are consumers that are accustomed to buying a PC with pre-loaded software and never buying another thing for it, other than a replacement PC. They found it offensive to suddenly start buying software piecemeal.
Now, the same people have been using iPads for the past year and their attitudes towards software have shifted. There's a threshold, but if the software is below $30, there are far fewer protestations. My friends have no problem dropping $10 on an app for the Mac, because the iPad has trained them that good software costs money.2
On the flip side, it has also created a group of consumers that are very averse to prices over $30. After buying dozens of iOS apps for $0.99, anything over $5 is considered expensive.
The App Store is filled with abandon ware. I don't think that's because there's no option for upgrade pricing. I think it's because it is very inexpensive to shovel apps into the App Store. Adding the ability to pile on upgrades is going to frustrate users that are only just now becoming comfortable with buying software.
I don't know what the right answer is. I just know what I see. I see a lot of average customers slowly opening their wallets in reluctant acceptance of the App Store. Apple might want to be careful about scaring them off.