1) Why do customers keep letting themselves be abused by companies with crappy products that don't last?
2) IANAL. Is this type of defect something that could lead to a class-action lawsuit and/or a recall?
The market the fitbit crowd occupies isn't the same as individuals who have a serious interest in fitness or interest in long term reliability of their product. They're interested in the social aspects.
People seriously into fitness are probably looking into the higher end devices such as from Garmin or Suunto for example. These devices tend to be more durable with less social interactions, especially since most are in the fitbit or apple gated community.
As far as your second concern, unless these devices are falling within warranty, it's unlikely that any class action would hold any ground, seeing as they probably had a 1 year warranty right and sounds as if they made it an extra year.
It seems as if you're in an in-between group. Consumers, by and large don't want the complexity of these devices today.
20 years ago it was removable batteries and microSD cards. People overwhelmingly voted with their pocketbooks to get rid of those for a more limited but more fashionable phone, which like your watch has a wear out date. It's unfortunately easier to replace an entire device now every few years than it is to support devices that are a year or two old.
Another aspect is the useful life of batteries.