I think boneheaded is a strong word. They're solving a problem that very few sites have to solve (huge traffic with low cache-ability) with vastly less resources than the others who do solve them have. (FB, Twitter, etc).

AMZN in general is a pretty solid 'platform' (especially if you're not using EBS), but because this whole 'cloud' thing is still partially uncharted territory, there are still holes, and you can't treat it like a normal web host.