Of course, every business has to find the model that works for them and I think it is totally cool that you share Sidekick's experiment and their thinking and process. However, suggesting that there is only one sustainable model seems silly and is not responsive to the market.

Here are two other options that might work, responding to the market and being sustainable:

1) You can always decouple the price of support and the price of the plugin or theme. Provide the plugin or theme with a lifetime of updates but sell support separately.

"Our prices would go up exponentially because we would need to make sure we’re covering the lifetime COSTS of a customer. Not a smart way to do business."

I find that 90% of my questions are answered in the product support forums by responses to other people with similar questions. I'm looking for support during the first few months while I'm learning to use the plugin or theme. Build up a knowledge base and make the forums open for customers but restrict posting to those with current support. Then charge for support separately after the first year. There is no reason that I should pay for the unending questions of people who cannot or will not use Google first.

2) Price the lifetime version of the product separately. I imagine that over time you build up data that shows an average of how many years a customer will renew and maybe another number for your top 25%. Say an average is two years and the top 25% is 3.5, so you price the lifetime subscription at 3.5 times the annual cost. This drives sales towards the top tier level and grows your business, while providing a reasonable option for those who want a lifetime subscription.

Do you really think there are no other viable options?