People are strange. In particular, people's reactions to in-game stores are strange. In-game microtransactions seem to bring out very mixed and contradictory feelings in people, and at the same time seems to blind them to the fact they're contradicting themselves.
Now, I agree that a lot of players say non-sense when they argue against item shops. They claim the kind of stuff Domino mentions. Or they claim that item shops are ok, but every item they want is too expensive.
So, what do players really want? A lot of different things. What I can tell you is why I don't like item shops. But first one sentence about "It's only vanity":
Vanity is one of the most important aspects of MMORPGs. It is not less important!
Games, as well as virtual worlds, are supposed to be closed systems. You are free to disagree at this point. If you do, we feel differently; and there's not much we can do about it.
Imagine you join a new sports team. A few days later you have the first match. Suddenly you realize that 20% of the players on the field have these really cool sunglasses. You ask the trainer and he tells you can pay a vanity price and then he'll give them to you, too. What's you're reaction?
Or imagine you're new to chess. At your first tournament your opponent has this magnificently crafted and superbly looking figurines. You, however, get some made of paper. What's your reaction?
In virtual worlds there's also the immersion problem. This is what many Eve players have. In Eve all items are crafted by players. Well, at least until now. Now there are items that are not crafted by players. They enter the universe from the outside. That feels wrong. It certainly doesn't add to the experience.
Add the corrupting effect of item-shops.
Problem is, item-shops don't make the game better. They are a business model and usually make the game itself worse. I can understand that an indie game uses them, because they don't have much choice. But if a AAA game has item shops that says that the developer is greedy and doesn't really care about the quality of the game. It's not like AAA-MMORPGs have a profit problem. Even the supposedly failed ones make a hell of a profit, let alone the successful ones!
One last thing: The developer's job is to understand players. The job is not to prove that they contradict each other. The job is not to prove that the players are wrong. If you don't understand the players, you're bad at your job; not the other way round.