After reading through this thread, it seems there are two main fallacies in the arguments opposing this form of DLC:
1. That 80% of the content (or even the majority of the content) is provided for free. This is not true. The only features included in 1.06 that could even be considered 'major' would be strong/weak claims and combat traits. Formable empires have been prolific in the modding community, and are not a significant change. There are a handful of new events for everyone, but there are many, many, many more for Muslims. There are also a ridiculous number of Muslim-specific traits, and the Muslim mechanics are completely different from Christian mechanics. I just finished a campaign, and it barely felt like CK2 -- the changes in SoI are much more drastic than the horde or Japan changes in DW.
2. That the non-SoI features of 1.06 are being paid for by the people who purchase SoI. Crusader Kings 2 hasn't even been out for six months. It's not unreasonable for people to expect continued support for the product they purchased. Here's an example from another one of Paradox's games: Victoria: A House Divided had a patch released (2.3) that added about as many features as non-SoI 1.06 CK2. These features weren't provided hand-in-hand with a DLC, they were provided for free, to people who bought AHD. Continued support of software is all but expected.
With or without SoI, we would've gotten 1.06. Without SoI, people who bought CK2 would instead find their product no longer being supported the moment a new 'expansion' is released. The key tenet of Paradox's DLC scheme is modularity. People who initially bought CK2 can expect CK2 to continue to get better. DLC will be released which is entirely modular and adds additional features for those who wish to pay for them. It is the best option for the consumer -- we get faster, more frequent updates, and we get to choose which features we want to pay for.
If I had no interest in playing as a Muslim (and I'm sure there are quite a few people who don't) I could simply choose not to buy SoI and the product I bought five months ago would continue to be supported. Playing as a Catholic would continue to get better with patches! If Paradox relied on larger expansions, I'd be required to pay for additional features that I might not even want, the base game I bought would cease to be supported, and the multiplayer community I play in would be fractured. If Paradox were truly trying to nickel-and-dime us, they'd continue with their old model, which all but forces consumers to pay for every update, even when the original might still be in need of bugfixes or otherwise incomplete.
To use AHD as an example: vanilla Victoria 2, to me, feels like an incomplete game. With AHD, it actually feels like a proper Paradox title. I can't imagine playing without AHD, honestly, and seeing the number of people that don't own it is astonishing. That example is basically the complete opposite of CK2, and I'm glad they're moving away from such a business model.