At this stage, Im going to stop using the word "Fiat". Its too strong in terms of lingo.
Im just going to refer to it as "decision". Isnt that why we have the DM, for making decisions? If we dont let them DM make decisions...why play? If I didnt want a DM making a decision, I would play a computer RPG. But I choose this form of gaming because it can do more.
Referring to the problems of 100% fiat. Yes, these things would you pointed out would be problems if the DM's had no rules to guide their decision process or they ignored the rules they have. You have gone directly to the extreme of what can go wrong when DM's have total control...I would never advocate such a situation.
That a decision is a MIX of DM and rules is not in dispute (It isnt in my mind at least). What is in dispute is how the rules should guide the DM decisions. I just dont want a situation where we have a loose system of improvisation sitting beside an arbitrary "usage based" power system and I certainly do not want a situation where the DM is utterly powerless to make change and adapt as he sees fit.
He is the DM for a reason. If he does a bad job of it, go find a new DM, but to strip DM's of ability to make decisions to compensate for bad DM's? Thats just not a solution in my eyes.
It's the old player entitlement to make the character they want versus the DMs entitlement to make the world they want.
Now I like the DM having power but the players and DMs interact with the system differently. Players are limited to the rules the DM allows. The DM is only limited to what the players are willing to tolerate.
Personally I hope 5e comes out with 3 or 4 different advanced combat variants. This way the player has something to work from depending on which one, if any, the DM decides to use.