Yes, they do know what they're making sucks and most of the time they don't care.

I used to have some sympathy with developers who would get absolutely trashed for making a bad game thinking, 'Poor guys. They don't deserve that! How demoralising' but that isn't the case at all. First... they are professionals and know what they are doing when they are programming. They know if something works and if something does not. And second... good game or bad game, they still get paid the same for what they do. And third... among some developers, their is a degree of arrogance about their programming skills. In Edge magazine I once read an article about game Testers where they would do their best to find as many bugs as possible, list them all down... and still find the same ones in the final release. Some game programmers resent having their mistakes pointed out to them.

I am not a fanboy but there is only one company that releases virtually perfect, bug-free games and thats Nintendo. They have their own QA team called, I think, the Mario Club? (I think... I am not sure) and that is one of the best Quality Assurance teams in the world.

2 games that come to mind as badly programmed, sucky games are Tomb Raider: Angel of Darkness and Driver 3. Both games were awful, really bad, but slick marketing by their publishers ensured they sold millions around the world... thats millions of crap games in homes because of clever marketing. And in interviews the developers of both games said 'Yes, we made some mistakes'... so I am sure they know what they are doing.

Granted, crap games may be crap because of publishers putting pressure on developers, ie, to hit a Christmas deadline or something, so the developers have to rush to get the game completed to meet the deadline and therefore make programming mistakes... but thats no excuse.