That's a stupid justification and you know it. Dex 0 confers the (far worse) Helpless status, not the Flat-Footed status. "Can't move" obviously doesn't mean "is kinematically equivalent to an inanimate object".
Ignoring your inflammatory tone, If "you can't move to avoid a blow" then you are effectively have a dex of 0 because wait for it.... wait for it....
"....you can't
move to avoid a blow."
Having a Dex of zero doesn't mean your eyes don't blink or you stop breathing. But it means "you can't move to avoid a blow." You know what else can't move to avoid a blow? My chair, my microwave, a telephone pole, etc. All these things have an effective Dex of 0. Guess what. I didn't write the rules. That's why the rule, as written, is ridiculous.
Turning Flat-Footed into a flat penalty would make the game less balanced.
Prove it? Your opinion on the matter proves nothing. Prove the game is less "balanced" by showing me stats which support your claim. Back it up with objective facts taken from hundreds of samples which prove "balance" one way or the other.
Dexterity can't be your only source of AC because sooner or later you'll end up flat-footed and have nothing.
Which would suggest the rules as written are completely ridiculous and are, to use your own words, "less balanced" with regards to Dex based characters.
In order for Dex/Dodge bonuses to be balanced against Armour/Shield/Natural bonuses, they have to be negated with roughly equal frequency.
Prove to me that in any given campaign, they are negated with equal frequency.
If flat-footed becomes a penalty that applies to everyone, then armour becomes much worse than Dex because now your Plate Armour is as bad off in flat-footed situations and worse off in touch attack situations,
Uh, by what logic? If you apply a flat penalty, you're still better off wearing armor than not wearing armor. But guess what...you've been caught flat footed. That means you should be easier to hit, no matter who you are because even someone with no dex "bonus" is considered to be able to avoid a blow better than someone who is immobile.
and you can mitigate a flat-footed penalty by just getting more dex, but you can't mitigate a touch attack by getting more armour.
You mitigate a touch attack by getting more Dex. Which means you make a decision when you build your character and you live with the consequences. In addition, you're also ignoring the larger context. This discussion really only applies to melee combat classes, since they are the ones wearing the armor and relying on AC to avoid damage. Given that context, high Dex builds, are generally low Strength builds. Low Dex builds, are usually high Strength builds (again, in the context of fighting classes) Strength based builds enjoy a tremendous combat advantage over Dex builds. I am not aware of a feat in 3.5 which allows you to turn your Dex modifier to a damage modifier. Int, Cha, maybe even Wis? Yeah, but Dex? haven't seen it. So Dex builds are taking longer to kill stuff and exposing themselves to more damage. So you've got a long way to go to prove that the current system isn't incredibly unfair to Dex-based characters.
EDIT:
And just to make sure you're not confused, when i say flat penalty, I mean like something between -1 to -4. I'm not suggesting everyone get pushed to a Dex of 0. That would be stupid, imo.