[webwright]

I think it works both ways.

Putting basic functionality first doesn't mean eschewing UI assumptions-- it just means making LESS of them. You can't make anything without making assumptions.

Too often, devs assume that iterative development means that they build the simplest version however they feel like and THEN call in the designer to work with them to clean it up, improve it, add features, and make it pretty.

IMO, the best way to do iterative development is to work with the UI designer in the designers preferred medium for early prototyping (xhtml/css, photoshop, paper, whatever) on the "basic functionality" that you mention. THEN build it and have your target audience use it. Rinse, repeat with improvements and new features.