By choosing only one item you _aren't_ 'making a list of 3-5 items' which is the instruction for making a wish list. I wouldn't call that screwed, but I would say it's losing the benefit of the DM being able to customize treasure by you giving him a list with a few options.
Just as much as if the only item on the list weren't within 4 levels. The paladin can make a wish list of '+6 Holy Avenger', but I don't think the DM has to give his 1st level paladin that item. He can cheerfully ignore it.
As the DMG says "If characters don’t find things on their lists, they can purchase or enchant them when they reach sufficient level."
Yup. The way I see it, the wish list is a tool for DMs to find out what kind of items the players are interested in. It does not exist to restrict the items I may put into my adventures.
As an example, the barbarian player who picked an executioner's axe as his weapon of choice naturally wanted an executioner's axe with an enchantment that helped when making charge attacks.
So I included a different kind of weapon with a similar enchantment. At his next opportunity he bought and used a scroll of transfer magic from the money he had gained by pilfering a gem from the group treasure.
I also found it interesting that the group decided the barbarian pc should get three of the six magic items they'd found in their first adventure (thus including the ones that I had originally intended for the ranger and the fighter). The players decided this after seeing their characters in action and found they didn't really need or want those items anymore and felt the barbarian could actually use them better!
Another player received an artifact instead of the item she was looking for. She seemed to like that even more than one of the items she had on her list.
I actually do hand out more money than indicated by the treasure parcel system. Mostly, they get this money from solving quests and by finding better deals (via roleplaying) when selling loot.
I'm also fond of using customized item that work similar to Weapons of Legacy in 3E, i.e. that grow with the power of the person wielding it. After reading the DMG2 I'll also definitely include some of the alternative rewards.
I think that's a more fun approach than simply handing out exactly what the players put on their lists.