I do think ArenaNet underestimates its community. They underestimated us when they came out with the Crown Pavilion. I finished that stuff fairly quickly, and maxed out the meta-achievement. Were dungeons completed faster than they anticipated? Probably. And Hrouda tried to complicate matters by making them harder. But his design philosophy ended up not meshing with what the community wanted, reflective of the lack of players doing the paths that he touched before leaving ArenaNet. And I would argue that AC path 2 is now not very well balanced with level 35 players in mind; I think his changes would have sent the game in the wrong direction, which is why they scrapped that idea and made Aetherpath a level 80 dungeon for level 80 characters instead. And I believe that was the last thing he made before he left.
ArenaNet might have changed "direction" in their design philosophy creating dungeons between June 2011 and August 2012, but I don't think the game has suffered for it.
They don't underestimate the community, they design for the lowest common denominator. Since these are limited-time engagements they make them easy so everyone can complete it, even people that only have an hour or less a day. That's the crap of the living story versus an expansion. If they just dumped a bunch of permanant content they could make it far more difficult and engaging but the LS content is just so much easier to make and there's no balance involved. On the plus side with temporary LS content they can hope the community forgets the last batch and logs in for the next round hoping it will be better and tie in more gem products.