It's hard to believe that every high up in a major game company is completely delusional. It seems far more plausible that quality does not factor into the equation at all as anything more than a buzz word. A more accurate statement would be Money = Money. You put money into making the game seem really good by concentrating on the surface aspects and hype, and lots of people will buy it, play it for a week, then never touch it again while raving about how great it was because that's what they're supposed to think. Then they'll do the same with the next game. Thus giving you money. If you spend more money on making the game actually good in ways that can't be easily showcased, people will actually love it, and play it for a long time... Which isn't really good for business because you aren't making more money if people are still playing your last game and not buying the next one.
Ayup, that about covers it.
I saw a lady (45?) in Gamestop the other day point to a poster for Wolfenstein and tell her son (15?) that it looked like a neat game. From a TEASER POSTER.
It's signalling theory, pure and simple. High production values are obvious to consumers, whereas writing quality and level design quality are not. Therefor, in the bang for the buck department, they are more valuable. Game sales peak early and drop fast, so long term reputation isn't valuable save where it encourages sales of the next game.
Add to that an active resale market for games that further cripples long term sales, and you've got a market that gets maybe a month's worth of real sales.