To clarify the difference between D2, WoW and D3, lets focus on the basic knowledge regarding the servers and vulnerabilities emphasizing pros and cons. First, D2 had client side server access, WoW has server side and D3 will have server side. Wow has been hacked for awhile granted but I wouldn't be surprised if said issues stemmed from AT&T's servers (assuming they are still in use). D2 was hacked using zonfire for single player purposes and other means for online purposes, including the use of mods to autoloot, fill in maps, locate particular drops from a critter, etc. D3 is trying to correct the mistake of market manipulation via hackers(meaning prevent hacker intervention on an economy that we manage ourselves). What this means simply put is that the drops would be no different than WoW's world drops, the difference between single player and multiplayer would be the ability to play the campaign alone (which counters the scaling in difficulty and experience when in a full group on harder difficulties) and bring that character over to the multiplayer side for online play. One major concern with D3 single player being offline is the fact that people want to play offline but blizzard does not want them to play offline, hack the game and convert their gear onto to the multiplayer servers, thus potentially creating a monopoly if that information was "backed up" and manipulated in some way.
Onto the subject of the internet discussion, granted alot of players are in rural areas but Blizzard is trying to focus on one particular model, aka the gamers that are in the city. I use to play WoW off of dial up and worked for a dial up ISP, I know how you feel about this but trust me, if they cater to just your wishes, the game itself would be shifted into a vulnerable state itself considering how they have things modeled. You are not sacrifices regarding this subject, but you are an element they will have to redeem themselves to, this will happen through live trial and error.
About the gameplay elements, the d2 online gameplay did take on a form of its own. You had a pvp augment of the multiplayer games in which you basically fought against eachother using enigma armor and 1 shot basically killed you instantly. You also had a normal game where you played with people using ladder settings or normal settings, ladder basically meant you had better chances of obtaining special/rare gear that couldn't be obtained via normal gameplay, nothing different other than that and monsters that appeared. Hardcore gameplay meant if you died once, your char was basically toast and you had to start a new char. The problem with these games was the fact that someone in the town, within a few minutes of joining the game, could locate you within seconds, enable pvp and nuke you before you could save/quit safely. The other problem was that you could not disable their assault via pvp. D3 is modeled after the PVE elements and emphasizes the pro's that people desired when playing D2 in order to combat the con's that became apparent with the market manipulation and the risks when trading gear (yes if you ended up trading for hacked gear, you would lose it instantly and some pricks would disable trade in order to force you to drop the piece you were putting up into the window so they could snag it).
The purpose of the auction house is simple, it permits legal trade of money for items ingame. Meaning its their way of correcting gold farmer behavior and hacker manipulations of the market itself. The benefit is a lack of keyloggers and people finding that their machine is not a contribution to a botnet. Lastly, they will not manipulate the market drops that occur naturally, say stones of jordan from d2's online play or runes. They will only adjust the drop tables so that a % of the critters drop an item per game and that the chance for a particular item will scale dependent on the difficulty, quality of the drop and potential factors such as d2's magic find feature.
"Essentially everyone" just means the market of gamers in general. You need to remember that there is a small margin of players that move to rural areas on purpose and other margins that live there, well its usually due to personal reasons such as a family decision and they are still a dependent (college reference) in regards to their parents.
Private servers are servers hosted client side, it does not mean that the data on the client side can be sent/uploaded to blizzards personal servers and accessed for use on the public server itself. The hackers there are using a backdoor that may be existent from the change in server services (iterated myself).