I'm no expert but I did stay in a Holiday Inn once, so let me take a stab at it.
If I build three homebuilts a year for the purpose of selling them at a profit, I am manufacturing airplanes as a commercial endeavor. The FAA has a host of (burdensome and expensive) regulations governing the manufacturing of airplanes as a commercial endeavor, which the likes of Cessna and Boeing are obliged to comply with. However, I am using (actually abusing) the "amateur-built" rules as a way to circumvent those rules. That is illegal, no getting around it.
When I present the paperwork to the FAA to get the pink slip for my homebuilt, I sign a bunch of paperwork, some of which is notarized, stating that I complied with the regs and built this aircraft for my own "education and recreation." If I am the above mentioned commercial endeavor, then I have just falsified a bunch of federal document, a scenario not unlike lying on your medical application about a disqualifying condition. In my state (and most others) making a false statement on a notarized document is a felony. So, it is illegal on a whole 'nuther level.
I will grant you that there is a small difference between someone who builds an airplane "turnkey" for a pre-arranged customer, and one who simply builds an airplane, flies off the test hours, then hangs an ad on Barnstormers. However, those are simply two sides of the same coin, and in both cases, the builder (and in the former, the buyer) are committing illegal activities.
Now, the activity that you describe has been going on for a long time, and the FAA has more or less turned a blind eye to it for a number of reasons. This has led many people to conclude that, because the FAA is not going after these people, that it must be OK. However, the as more and more people got involved, and the line got pushed further and further, the abuses became so blatant that the FAA was essentially forced to get involved.
I hope this clarifies things just a little bit. Joe Norris is probably the most knowledgeable person on this forum, maybe he can weigh in on the subject.