If startups do not want high turnover, they're free to offer above-market-rate salaries or a contract mandating a longer notice period on both sides. Overwhelmingly, they've chosen at-will employment instead.
However I agree founders should be up front about the financial/investor makeup of the company.
I assume that the options are intended for people that are bad at math.
It does appear to be a way to get employees for cheaper than market rates by taking advantage of an arbitrage in employee lack of understand of the financial and legal issues concerning stocks.