I think I (mostly) agree with you, but it seems like SEO and search in general would be even more distorted if outright advertising were disallowed or penalized.
It's commercialization in general that distorts things, and you're probably right that SEO without advertising might actually have been worse? But then again, the online advertising market is a whole evolved thing that maybe...doesn't need to be...as big as it is? E.g. I don't see structurally how the economy requires spending hundreds of billions of dollars on advertising to function.
Yes, I agree that (on and off-line) advertising does seem to be unnecessarily expensive (across the economy), but valuable 'advertising placements' are scarce, and I'm not sure how else they could be allocated.