You only hire an SEO for one of two reasons: 1) too cheat Google, and 2) to compete with all the other sites that hire SEO's... There isn't an ethical element in this whole equation.
Where SEO is of value is in helping those who do not understand how the internet works optimize their sites to have them be more relevant. Perhaps a new term ought to be coined. Something like SRO (Site Relevance Optimization)?
Anyone with even a basic understand of what search engines are looking for (or trying to do) has come across sites that just make you want to cry due to the lost opportunities. A lot of these are smaller local shops that just don't have the tech and marketing horsepower to deal with it.
Being in the business of advising business owners on such things as posting content-relevant articles, carefully choosing titles and related tags, etc. is not evil at all. This is actually a good wholesome service.
SRO (or whatever) is what most sites should be doing. Ranking higher would come as a side-effect of SRO.
SEO people are like sports coaches. You have good coaches and bad coaches. Good coaches will help you with an effective training programs, and analyze the competition. Bad coaches will tell you to use drugs.
Good SEO people will help you win by improving your site and inbound links, bad SEO people will help you to win by cheating.
Nothing wrong with wanting to win, though...
I too prefer improving a site rather than gaming search engines, and I've argued against SEO consultants who want to do things like keyword-stuff urls, but now I sympathize with the pro-"bad"-SEO argument even though I prefer not to get involved in that kind of SEO.
Even with Google there are biases towards keywords in the title, url, or domain, even when it isn't relevant.
People needed SEO even when no one was selling it.
you could make the same argument about all advertising/marketing.
the best product should win on its own standards, without advertising, right? for example, wouldn't we all have better insurance rates if geico, progressive and esurance didn't have to spend their money on advertising?
But the truth is these insurance companies are disrupting old school insurance models that are less efficient and bringing value to more consumers faster with their advertising.
companies adapt, consumers adapt, markets adapt, search engines adapt. companies and people are going to work toward their self interest, and SEO is one way to do this. its called capitalism.
You know... marketing by itself is not unethical, though when you use tricks to induce people to buy something even though you know it's not good for them, the line is crossed. Like when a large fast food restaurant starts giving toys away if you buy their food... inducing children to annoy their parents so they buy unhealthy food just to get the toys. Or when you show sports people smoking a cigarrete, linking the image of smoking with a healthy life.
Of course, if all that matters is making money, then cheating the search engines (or peoples perception, in the case of marketing) is fine.