Yes, the event is better with a full field.
But it is also better when that field includes more top-rated players. So I think it is important to have strong disincentives from being cavalier about reserving an entry. Making them nonrefundable and nontransferable is one way. Yes there is an occasional story where we might have some empathy, like Oscar and his Dad. But in the aggregate the policy might do more good than harm.
The argument that the policy is inherently unethical just holds no water. It stems from the idea that what you are paying for is spot W17 on the tournament board, like when you have a ticket for seat 14B at a concert.
But it doesn't take a lot of imagination to see there are other ways to view what it is you are paying for. In particular, in this case you are paying for the guarantee that you will be in the draw if you show up, period.
If you make a reservation for a whale-watching trip on a boat that holds 12 people, and you don't show up, they're going to invite a walk-in tourist to go on the boat. Unethical? No. You didn't rent out 10 square feet on the starboard side of the boat, you merely paid for a guarantee that you would go in the trip if you showed up. What they do if you don't show up is not really your business or your concern.