definitely. when fps jumps all over the place it's no good. 100 fps dropping to 40 feels worse than a constant 30. agreed!
That depends how the game handles it's timing. If it actually slows down you are absolutely correct but if it drops frames elegantly while keeping everything moving at the same speed it can work very well. Imagine a game that regularly has large explosions on screen for a few seconds, people don't tend to notice dropped frames (caused by the graphics chip having to do several times as much pixel rendering with alpha) as long as there is plenty happening in their face. Running Quake 1 with the FPS readout on was a revelation back in the day. A solid 35 FPS on my 70 hz monitor but just firing a rocket down a narrow corridor and forcing a lot of light map rebuilds caused it to drop to 7 FPS for a few seconds. With the rocket trail in my face and the walls dynamically lighting up I really hadn't noticed the 'slowdown' but then, it wasn't really a "slowdown", more of a very elegantly handled "smoothdown". The thing I'm working on right now works like this, as does Ground Effect to some extent. It's definitely preferable to limiting my frame rate and pyrotechnic effects to what a 1g device can handle for the game I'm writing.
This is also dependant on what type of game as well. For something like a turn based game, a consistent framerate is preferable, but ultimately doesn't affect much of the gameplay. Inconsistent framerate for more control oriented games like a vertical shooter or a music game, in which reaction is what matters, framerate can easily turn an enjoyable game to frustrating game. Anyhow give me more games to put on the list. Even you dev's must have played some games as well right?