That's how most Xbox games work. There was a bit of a uproar about it when the service started. Players were miffed of paying to play games they already bought, and not even getting dedicated servers. That quickly died down.
Not really. Host advantage is still a thing that happens in a lot of multiplayer games, and peer-to-peer multiplayer has never come close to the same experience as a dedicated server.
Oh, it's definitely still bullshit. You're right, it can ruin games directly, and even indirectly as others may assume you have an advantage because you're the host and quit. Dedicated servers are indeed simply better on games with more than two players.
I just meant the outrage over it seems to be much less a thing now. Now it's just accepted that this is how it should be done. I think like afterburner suggested in the sister comment to this one, those who were seriously offput by it have left and that's that.
I think most people just swallowed it. Sure, some went exclusively PC/PS3, but I don't think that many quit because of it.
Personally, I dropped XBL years ago because I was tired of children eager to sling racial and homophobic slurs. Playing games online just wasn't fun to me. I went on to play a lot of TF2, but virtually no one there uses headphones mics either. That, to me, was the appeal of Xbox Live. Everyone had a mic. We were to communicate and make the games fun on a whole new level. Instead, well, no. That didn't happen.
I think that's how Halo's online gameplay has worked for a while. http://halo.wikia.com/wiki/Connection_Host