Separate revenue streams for audio books is not just a quaint custom in the publishing world, but a consequence of copyright law, which treats text and audio rights as properties that may be licensed separately. He's arguing that his constituents' property is being taken from them without their consent. I think his case is weak, but it's not dumb.
Also, what if you're using it as a "book on tape" in the car, on a road trip through the middle of nowhere? You lose network connection, you lose your book on tape.
tldr: I think it would be better quality, when you could get it, but at some level reliability is more important for this application.
I don't understand what the Author's Guild is trying to do here... Obviously, Amazon's lawyers have considered what the implications of an text-to-speech service are. As far as I can tell, the AG isn't even filing a lawsuit, just a PR complain-campaign. What does that get them?
Conspiracy-hat-interpretation: this is great PR for the Kindle's new text-to-speech features. If it wasn't for the Author's Guild, this would be just another bullet point on the features list. Is this a favor from Roy Blount to Amazon?