I think the "update" argument is somewhat unfortunately framed to favour one business model over another.
You seem quite pleased to have got some portion of the new features of iOS 4 and 5, yet the last time I checked my cheap ZTE Blade was still getting updates to all the core apps direct from Google. Youtube, Market/Play Store, Maps being just three apps that have received *major* overhauls since I bought the device, with no need (or desire) for ZTE or my carrier to be involved in the rollout. I would have thought this decoupling would be hailed as a good thing, but it seems if you don't increment the OS version number then no-one cares about new user visible features.
You're also lucky you had the 3GS, I had the 3G and switched to the ZTE Blade after the iOS4 update rendered it nearly unusable. Clearly not enought planning and effort went into providing that cut down version.