The AH is taken into consideration when they (the game devs/Blizzard) set the % chance for items to drop. If they set that % too high, the items will become worth less. Are you guys arguing against that?
I agree with what you said, however it's also mostly irrelevant.
Whatever the chance is, it really is unimportant. The market adjusts, very efficiently, so even if the chances were different the market would end up the exact same as it is now.
For sake of discussion, lets say items fall in power from 1-100. And also for the sake of discussion, lets say you can get a item as good as 90 in a few hours on average, but a 91+ item is much more rare, maybe dropping once every 12 hours. Most players would easily acquire sets of "90" gear, but 90 gear wouldn't really be worth any significant money on the auction house either. The super rare 91+ gear would be expensive and very hard to obtain outside of the auction house.
Now blizzard steps in, and realizes the sad plight of the players, and adjusts drops. Now you can easily get up to a "95" item within a few hours. Soon everyone has sets of 95 gear, and 95 gear is worth nearly nothing on the auction house. The only possible upgrades are now 96+ gear, which again is super expensive and so rare that you only see one piece every few days of farming, and even then it's probably not going to be itemized for your class and build. The situation is unchanged.
It doesn't matter where blizzard sets the "rarity limit", because whatever is easily obtainable will NEVER hold high value on the auction house. The only real "solution" to this would be for blizzard to not have any rare items at all, in which case everyone gets an optimal set in the first days of playing and loses any desire to ever play again- not a solution at all.
This so-called problem that blizzard created is not a problem at all, it's simply the nature of the game, and there is no way around it.