I think modlife can work because it's customizable.
If you can't update as much, then charge less. If you barely update, then don't charge at all, or charge very little. Or just charge the parts of the site that actually can sell and make the rest of it free. The band creates any source of revenue they want based on wahtever they want to put up, and then the fans decide if it's worth it to pay or not. If they think it's worth it then let them pay, who the hell cares. If it's a ripoff, it's a ripoff in a way that the band has decided to run their modlife. It's not exactly fair to say that modlife as a whole, in general, has to be a ripoff because one band runs their modlife as a ripoff.
I think the problem is that people think that the way AVA runs their modlife site is the way it has to be, therefore if AVA's modlife sucks then the whole thing has to suck. I think that's kind of like saying if somebody has a crappy ugly myspace, then that means myspace sucks, because one person decided to run their myspace in an annoying and cheap fashion.