You answered your own question above, and also identified why app.net won't interest you. If you're okay with ads, then I think you'd get zero utility from app.net
Are ads in and of themselves really a huge problem? I don't find myself often annoyed by them. Now if there were a systemic change to the service because you didn't have to alter the experience for users to generate ad revenue, then I begin to understand. However if this is the idea, then in what ways the service would be different is exactly what I'm trying to figure out.
Remember, there are two sides to the coin "we offer a better experience without the ads" method. First of all you are going to get a smaller user base. So how much are you going to charge? $5/month? $10/month? You would need to get a pretty massive user base to be able to pay the overhead and attract top engineering talent, so in the end I'm not sure you'd be a whole lot better off.
A lot of people don't want to be the product and believe when a company focuses on them as a customer rather than them as eyeballs to be sold to advertisers, who are the customer, then a better service is the outcome for the users of the service.
With app.net the user is the customer. With Facebook and Twitter, the user is the product. With App.Net user interests and service provider interests are aligned. The provider wants the service to be better for the users.
With Facebook and Twitter and other ad supported products the users who value their privacy have intentions which are constantly at odds with the service provider whose intention is to continually open up details about the individuals so that those details can be used to improve ad success rates and profitability.
So, what explicit rights does the customer have over that which they get with Facebook or Twitter? Do I have voting rights for features? Is the business model solid? I mean, $500,000 is great and all, but that needs to last an entire year all while supporting future development. Sure, they can get new people on board, but what's their plan for that?
As for being the customer, it means little. As we've learned from experience, being a customer doesn't mean anything. You ask a question about being the product or being the customer as if being a customer actually gives you something, when in reality, it doesn't. I mean, in this case, you get a years worth of service. After that, nothing else is promised.
So, beyond the years worth of service, what do you really get? What are they promising? Because so far from what I see, the reality differs from the promise.