The phrase "labor of love" specifically means something that is done for personal enjoyment rather than material gain. I can love my job, but as long as I'm getting paid, it is not a labor of love. A book someone writes as a labor of love is usually in their spare time and not under contract or deadline.
Passion is indeed important to any writer, and any process that puts artificial constraints on what or how a writer creates can be deadening.
However, you are assuming you can see into someone else's heart, their creative soul. You can't. People write for different motivations and readers or even other writers or editors have no foolproof way to tell if someone is writing one of those seeming "labor of love" novels because he or she hopes to be famous or rich or to score with someone who digs the artistic type or some other non-aesthetic reason. And without being privy to the editorial process, you don't know what changes were made to any work on its way to the bookstore--or why those changes were made.
Similarly, some "shared world" books are put together in precisely the liberated fashion you describe. The first draft of
The Crystal Shard, for example, was written without a contract or deadline and submitted blind, unsolicited, to TSR. The pitches for the original Harpers books involved writers telling TSR "This is the book I want to write, and here are some chapters and the plot" with no input or promise of contract or pay.
It's also not accurate to equate the presence of pay with a lack of passion. They are not mutually exclusive. Someone can work in publishing because she or he loves the work and, coincidentally, be lucky enough to get paid for that, just as a doctor can be passionate about medicine and get paid for that pursuit.
In fact, let me note that pay in publishing overall is miserable. The average advance for a shared-world novel is, say, $5,000; a fair number of books do not earn over that advance. If you break that down per hour of work required to write the typical 90,000 to 100,000 words, you'll find that your annual salary will likely make you eligible for government cheese. Most writers, even of shared world books, do not write full time. They write in their spare time, usually because they love to write.
All that said, there are aspects to shared world projects (contracts, editorial control, etc) that can be anti-creative, and these production issues are what contribute to the high number of mediocre titles in some shared world lines. Some writers can successfully negotiate these minefields and create the books they want to create. Others cannot.
But, in the end, it's a mistake to assume that you can tell something about a writer's motivation--whether he or she is writing for a paycheck or to tell a story--by the fashion in which a work is published.
Cheers,
James Lowder