I agree with you, Jason, that not all iteration is the same. I stated in the piece that:
Iteration is a great design tool. Design processes can benefit enormously from putting a concept, prototype, beta, or early version of a product in the hands of users, obtaining feedback, and adjusting the product to improvethe user experience. This kind of feedback loop is helpful at every stage of the design process.
It is using iteration as a replacement for design rather than as a tool of design that I am warning against. So I think we agree with one another.
As you say, starting right is critical. Then it is also crucial to apply good design to the problems surfaced through iteration and user feedback. You are correct that new insights can arise through an iterative process, as the designers better understand the users and their problems and how the current state of the product is or is not doing a good job of solving user problems. Used properly, iteration is a tremendous design tool.