It's not flawed at all. It's deemed a different product by the airline and the passengers pay a different amount for that seat. If someone who hasn't paid for it sits in it, it's no different on the simple basis of paying a different amount for whatever it deemed to be different.
I'll say it again, the specifics of what you or I consider to be worthy of a different product are irrelevant i.e. a different seat and different service levels. The airline has decided that more leg room is to be a different product and on that basis alone they charge more for it and therefore if you haven't paid for it, you can't sit there - that's it. I didn't say I agreed with it but it is what it is.