They were against people selling things over ebay and the like that were housed entirely within their game, partially b/c a lot of the things being sold were duped items and if they tracked them down and did a big purge, they knew people would lose their item they had paid real money for. In WoW, most (all?) item duping tactics have been blocked over time. People used to dupe items by entering instances, trading items then quickly logging out. They would log back in and still have the original item. That has been blocked for a long time.
Blizzard seems confident they have duping techniques covered w/their current plans w/D3 and they are opening up the option for real cash. I know lots of people who have asked for this for years in WoW. Currently you have to earn badges or special trade in drops, some of which only drop in specific high level raids, for some of the best gear in the game. The only thing Blizzard sells outside of the game is non-combat pets and such, so no one gains an actual competitive advantage just for having more money.
Real money AH in D3 will allow people to just spend some money to outfit a character, but everything that will be on the AH will have been legitimate drops form within the game.
Sorry I should have been more specific. Once they started making the ladder games better (i.e. more options in gear, etc) than non-ladder games, if you wanted full access the only router o go was to make ladder games. Then if you didn't want other people in, making a passworded game was the way to go. Yes, SP/local LAN was still an option, but once the 1.10 patch came out I was playing online highly w/friends in passworded games and we were muling set items and cubing runes into higher ones and sharing all kinds of cool stuff. That beat the crap out of offline play for me.