I'm not totally buying that. They could have easily had an offline only single player mode which could be freely modded while not allowing any mods in online play, requiring separate characters for each mode, to maintain drop rate integrity. I'm not saying that would be the ideal solution, but it would be a hell of a lot better than the big old middle finger that mod and single player fans got.
I'll also add that even though I had no plans on buying this game (never played Diablo 2, and don't usually care for this style of game anyway), it pisses me off that it requires a constant online connection. I hate developers who do this. It's stupid, and ignores the large chunk of the world that doesn't have decent internet available or consistent access to a decent connection. I don't even have this problem and it pisses me off, and I wouldn't buy any game that requires it. Ever.
With regards to your mentioning that this isn't the same Blizzard we used to know Milf, I think it's safe to say that the merger with Activision is when they started acting stupid. I probably should have guessed that Activision stink would eventually rub off on them.
I also want to post this little editorial because I found it interesting, and agree with just about everything in it: Gamasutra - News - Opinion: Diablo 3 And Keeping Players At Bay
Blizzard used to at least seem to care about their fans and the communities that built up around their games. Now they seem to want to control every aspect of everything their fans do with an iron fist.