Thanks for commenting, and I do trust that those specifically tasked with search quality would seek it, unreservedly, without ulterior motives.
However, once such revenue-enhancing feedback loops exist, they can lead to self-reinforcing behaviors without any conscious intent. Simply the fact that Google has been so wildly profitable, even with search quality stagnant or declining for many spablum-heavy queries, could mean certain radical avenues of inquiry aren't considered. ("We're obviously doing OK overall, our search share, usership, and profits are up every quarter. Let's not rock the boat by starting a war with these content mills, which would surely include lawsuits and congressional hearings calling attention to our market power.")
Even the choice of overall budget for search quality comes into play. The current level of spending has, with its mixture of both qualified success and failure against spablum, done just fine for Google's margins. But I think Google could spend twice as much on search quality, and still be profitable. So, why doesn't it? Well, I don't blame Google for being profit-maximizing, but that means someone is controlling a relative-effort lever that makes search just so good, and no better, because of a tradeoff in which the marginal profitability of even better search is considered.
Also, what if Google's search quality gets monotonically better given the web it has to work with, but the overall economic impact of Google's ad programs and dominant-focal-point-rankings is simultaneously making the average web content worse? Then, each generation of Google's search tech may be better, ceteris paribus, but the net pollution effect still boosts Google's revenues via the three mechanisms I listed: longer search sessions, greater attention to paid areas, a more difficult environment for competitors.
Even your anecdote is not completely reassuring; for an AdSense/AdWords customer, it's not in Google's self-interest to favor those sites in natural results. By ranking highly in organic results, they might not need to buy as much paid placement! So that VP's stern warning can be explained by either a dedication to search independence, or to simply ad-revenue-maximizing self-interest.
Will I ever get an advanced search operator that will filter all AdSense-carrying results out of my searches? (I'm going to make one on Blekko, if possible.)