The basic idea is as follows...
- Buying gear on the AH (either to fill in holes in what you find or as a complete gearset) will make you more powerful than just using what you find.
- When presented with a source of power people will feel obligated to use it.
- As evidence, look at what happened with the 'optional' buff in Icecrown Citadel (a raid zone in World of Warcraft).
- Diablo III is fundamentally a game of using the items you find.
- Getting items in any other way is less fun.
- Since everyone is obligated to buy gear on the AH to be as powerful as they can be they will no longer be doing what makes the Diablo genre. Everyone will have less fun. The AH is therefore a mistake.
My first issue is with #3. Personally I wanted to play without the ICC buff but played with it anyway. Why? Because raiding in WoW is not a solo activity. I couldn't make raids harder for just myself. In order to actually play without that buff I would have needed to find 12 other people who wanted to not use it, and who wouldn't just leave when the going was slower, and who would all play on one server while leaving their current guilds. Theoretically possible but not realistic. Nevermind the fact this buff came in near the tail end of an expansion without warning. Guilds had already formed without any consideration given to how to handle the buff. Any guild that turned it off risked losing people opposed to it. So while no one turned it off that doesn't mean no one wanted to turn it off. Just that no one wanted to risk fracturing their guild by turning it off.
I don't agree with #2 with reasons demonstrated in my Final Fantasy marathon. I had an easy route to power in FFI, for example... Use 4 characters! Use something that wasn't a thief! In FFII I struggled with not using the easily accessible route to power (punching myself in the face) but was still able to find a way to play. In FFL my 4 monster party actually made complete use of the un-fun route to power so it may seem that I agree with #2 here. The difference, I think, is there was no other way to play. In both FFII and FFL after I'd set my party my choice wasn't between easy and hard. It was between possible and impossible. With most monster transitions costing you levels I don't think you could play without twinking. In FFII you couldn't really level things like agility and mp without being 'cheesy' and the final dungeon in particular wouldn't have been possible.
For #4 I have to assume the game still works with the gear you find. Eventually it'll get really hard (on inferno difficulty, hopefully) and you may need to twink out a bit more. But using what you find is still likely to be possible and therefore many people will still choose to play that way.
For #5 I disagree completely. Finding 5 pieces of an item set and not finding the 6th piece is actually really frustrating, for example. Being able to fill in that hole at the AH sounds awesome to me. Even beyond sets, I can remember playing D2 and commenting to Byung over lunch that I hadn't found a decent hat and was still using gloves of fire resistance. The next time I was playing my game was visited by my Fairy Godbung who came bearing a Tarnhelm and Frostburns. He even apologized that the random stats weren't maxxed!
I agree with #1. #6 would follow if the other ones were true but I don't believe them to be.
How will I play? Well, I doubt I'll use the AH a whole lot to start out. Only when the game actually gets hard or if I get really screwed by random drops in a specific slot will I go to check it out. In thinking about this I thought it could be fun to start a group of 4 characters who only played together and only used the loot they found as they tried to beat the game at all difficulty levels.
If/when I start a hardcore character I expect to spend a lot of time at the AH. With a harsh consequence for failure it becomes more important to use all avenues of power available to you.