Designers tend to dislike 99designs because it's spec work. Twenty designers will do work, and only one will get paid -- and for a fraction of what a real designer should be paid for a logo.
At 99Designs, people are entrusting the branding of their site/firm/etc to someone willing to maybe make $100 for a logo. Exceptions aside (Nike, Google), branding should has more thought and work put into it than someone can do for a few bucks.
This is, as near as I can tell, a marketing campaign unique to graphic design. In other professions, spec work isn't just accepted; it's close to the norm. For instance, a good lawyer might sit down with you for over an hour to consult about your situation long before he ever starts billing for his time. A full proposal usually takes me a couple days full time, and we're billable wall-to-wall. And so on.
The campaign against spec work began as a reaction to a genuinely abusive practice: companies would hold "design contests" and solicit whole campaigns from multiple firms, then cherry-pick their favorite ideas from all of them while only paying one firm. But it's evolved to a mythology about all spec work, and that mythology mostly covers up the real issue: the Internet has made "good-enough" design cheap for the majority of companies, including the majority of 8-9 figure revenue tech companies. PepsiCo will still pay you $100k for an important campaign, but most of the design business isn't PepsiCo.
99designs has issues (the biggest isn't quality, it's plagiarism), but there's nothing unethical about its structure, and anyone who suggests that the people who helped build it should be ostracized are saying much more about themselves and their own fears than they are about anyone else.
My experience with 99designs (on the buying side) has been that there are a _lot_ of shitty "designers", but if you persevere someone from Romania will show up and do a pretty good job for very little money. But you have to know exactly what you want and you have to be willing to play editor.
At 99Designs, people are entrusting the branding of their site/firm/etc to someone willing to maybe make $100 for a logo. Exceptions aside (Nike, Google), branding should has more thought and work put into it than someone can do for a few bucks.