In most jurisdictions, whenever you accept money for a product there are implied warranties of merchantability and fitness for a particular purpose. Since TM is widely touted by Apple as one of the features of OS X they cannot disclaim the warranty that it does what it is supposed to do, namely, back up your data. What Apple has done is analogous to selling a fire extinguisher that actually sets your house on fire. You can't disclaim liability for something like that.
Apple have always sold TM as a way of doing backups not archiving. The original article seems to want to have used TM as an archive, not a backup, and that's where the problems came in.
That said, maybe I've missed something in the marketing that Apple have done for the product - your comment seems to indicate that. Do you have any specific examples of false claims made in marketing TM by Apple?
TM would have deleted every backup they had if they didn't stop it in time. Wanting every backup you've ever made is one thing; wanting the last backup you made to be available doesn't sound like archiving.
No, it wouldn't. If it doesn't have enough space to keep at least one backup, it won't delete previous backup, it will tell you that you need more space.
Happily, the logs record exactly what happened. The request was for 877.54 GB. The TM volume is 731.95 GB. It deleted 14 old monthly backups (so just over a year's worth) before I stopped it. But given that it had requested more space than was actually available there is no reason to believe it would have stopped before wiping them all, and in particular, before wiping all my Leopard backups, which would have made it impossible for me to revert.
I don't have a copy of the software in question, I was basing my understanding of Time Machine's operation on the blog entry. When the author says things like "There are apparently people out there who have lost all of their backups because...", it seems reasonable to assume all means all.
Your logic is sound, but reasonable people can disagree. No operating system is designed to crash, certainly not advertised as doing so, yet all operating systems crash and these crashes sometimes result in serious monetary loss. But no one has ever won a verdict against an OS manufacturer for such losses (except for maybe like some defense contractor missile guidance OS or something. I'm clearly talking about Windows and Mac OS here.)
