I think paid DLC is fine, especially at a lower price than the original games. If they went the way of Sun/Moon and just released UltraSword and UltraShield, priced it at $80 and called it a day, I likely wouldn't have bought them. Cheaper DLC that offers a smaller but better developed region sounds great. And it adds a bunch of old Pokemon, to boot. At the time of writing, it seems as though they put a lot more work into the Wild Area, which is what severely disappointed me about Sword and Shield. I thought it would be a ton of fun to explore every nook and cranny of the areas, but I found they are boring and samey. Nothing interesting to explore apart from new wild Pokemon. No story development entwined within the wild areas. Just a huge place with random NPCs and raid battles. It got old fast.
I'm a fan of expansions for the Pokemon series, as opposed starting new games over every couple of years. Most of us play the same character anyway, so if they treated Sword and Shield as the baseline "vanilla" game for the Switch going forward, each new installment could be a new region that your character travels to. You keep all your Pokemon that you trained up, and instead of catching 'em all every single time, you just catch the new ones and add on to your already-filled dex. You could just cheese and destroy all the gyms with your super leveled Pokemon, or catch the new ones and beat the game that way. The latter sounds way more fun to me, but whatever, it's up to you. Your character would have a super stocked wardrobe and you could collect items of clothing from all the different regions as the game adds more and more expansions. Treat it like World of Warcraft. Vanilla is Sword/Shield, then release a Burning Crusade, Wrath, Cataclysm, etc etc etc. That would be dope.