There are two issues that are coming up here: sandboxing and paid upgrades. They are quite different.

As a consumer I am completely for sandboxing for myself and for other consumers. In a world where malware is increasingly a problem sandboxed apps will become the norm. That's the reality we live in. Sandboxing being a requirement means that I can fairly safely install anything from the (future) Mac App Store.

The OP correctly points out that certain system utilities cannot be sold this way. He is correct but consider the alternative: to not require sandboxing means no one will bother implementing it. Of course Apple could make effort to promote apps that do (or hide apps that don't) but this puts a considerable education burden on the consumer. I'm with Apple on this one: it's simpler and better this way.

Now paid upgrades I have mixed feelings about.

On the one hand paid upgrades can produce the wrong incentive on the developer: I've seen good apps go from 18 month major version upgrades, to 12 months to 6 months with no reduction in upgrade price. I've also seen old versions abandoned for pretty lame reasons.

IMHO having all users on the same version is better for the developer and the consumer. It makes support easier. It creates a consistent experience.

But on the other hand I do feel like there is a place for paid upgrades.

Are in-app purchases a possibility here? I honestly don't know what's possible with the Mac App Store here.

I think developers do get too concerned with turning a user into a perpetual revenue stream however. This is really an old business model that is somewhat outdated.

Steam provided the first evidence of this that I can recall. Some years ago they started selling older games for $5 and under. In some cases IIRC the revenue for discounted sales exceeded release date sales at the premium price. More: [1]

The iOS App Store produced and continues to produce further evidence that lower prices and a higher volume can often be a better result than selling the "old" way (higher price, fewer units, which typically also involves paid upgrades).

Often content producers (and I include developers who sell software in this) don't always know what's best for them. This all sounds remarkably like Netflix in many ways. Netflix has provided a means of monetizing old and less popular content yet Hollywood seems to view them as the enemy.

Perhaps another model worth considering is to start the price of your app low and as it improves and gains popularity, steadily (and predictably) raise the price.

Has anyone tried this? Did it work?

EDIT: sandboxing goes beyond "malware". I increasingly don't want apps making arbitrary changes to my system. Some may be what I want but most won't. This includes things like forgetting to untick the checkbox that installs some browser toolbar to (on Windows anyway) apps making arbitrary (and sometimes wrong) changes to local policies, registry entries, etc (so the Mac equivalent of that).

EDIT2: as a consumer, I want to buy through the App Store. Apple has my payment details. I have a common place to get updates. When I buy from a third-party site I have to deal with:

1. Registration;

2. A payment gateway that may or may not work;

3. Despite an automatic payment a human may need to email me a license file and/or download link that in some cases has taken days;

4. Whether or not to trust your site with my information; and

5. A completely separate process for updating.

So anecdotally as one consumer, if your app can be on the Mac App Store and isn't I'm simply not buying it with very few exceptions (eg I'd still buy Photoshop even if I don't want to).

[1]: http://www.gamasutra.com/view/news/174587/Steam_sales_How_de...