"Namely, it scares me that we're so willing to just assign the high ground to one group, and say that they trying to dislodge them is not "being good"."
You've misinterpreted my intent (and are easily scared). If you knew me, and the way I talk about competitors of Virtualmin and VM2 (who, generally, are not doing good by their users), you'd know that I don't have a problem with taking aim at competitors. But, it's an issue of mindset and morale, which is a core part of pg's talk. If you decided you have to "beat Wufoo" in order to be successful, every day that you aren't beating Wufoo is a day that you've lost. As another speaker at Startup School pointed out (in a different context, but it applies here) losing all the time really sucks. So, if you're thinking "I've gotta beat Wufoo" and Wufoo is thinking "I've gotta make an awesome product for my customers" you will lose and by losing you will find you feel more and more drained every day. While your competitor that is thinking "I made my product more awesome today and users loved it!" is going to feel great. They will come back the next day ready to do it again, while you'll come back the next day thinking, "This sucks."
That's all I'm saying. No one has a monopoly on "good". But, if a market already has a product that clearly meets the definition, it might be wise to pick another market. Nobody is saying you can't possibly beat Wufoo...but, pg said he wouldn't want to try. You, or anyone else, are welcome to go against that advice, but you may find it's a harder row to hoe than you expected.