To start, I do think people should admit that they IV hack or whatever. It's technically cheating and some people pride themselves on hatching eggs for hours and hours in a video game.
I find some things hypocritical though. For one, 99% of people simply don't care when Pokemon are AR-cloned. What? Everyone has that stapled rule "Legit stuff only" in their threads, but then they accept and offer Pokemon created using Action Replay? I'm not necessarily complaining, I do this too (and I do mention that my guys are AR-cloned). I just find it hypocritical. Not to mention people requesting nicknaming services. These are done with "cheating devices" too.
Also, there's the whole simulator business: Shoddybattle, Netbattle, Competitor, etc. By the looks of it, more people do (or will) battle using these simulators. When you think about it, people playing on these makes all the "hard work" you did breeding essentially useless - you're not going to use those Pokemon online. And you have the power to do what you basically do with the AR - create Pokemon without the leg-work. Pokemon that are completely legal and battle-ready.
But there's a difference between entering some numbers/codes on the computer/AR and breeding right? Well, not so much. Whether it's breeding or creating Pokemon, the end result is just a bunch of 0s and 1s inputted into the DS, ultimately displaying something on your screen. But with the AR you don't have to worry about random number generators, and you have more control. And it's all battle-legit, so when it comes down to it, what really is the difference?
As a breeder myself, I'm starting to see less and less of a difference. I don't notice the difference between my self-bred Lucario and one my friend hacked for me. What I do notice, however, is a large chunk of my time going down the drain breeding things.
Considering everything, I'm really perplexed as to why people (myself included) continue to breed, knowing they could get everything however they want with the same capabilities much easier. Integrity? Please, it's a video-game, you're pushing buttons. The only moral issue is honesty and admitting you create your Pokemon using a device.
Well, those are my views on the issue. To sum things up, I think that there is nothing wrong with using an AR to create Pokemon, and nobody should have a problem battling an AR-user if their stuff is all legitimately possible in-game. I would assume most of you would feel similarly, since this is after-all a competitive Pokemon community. Competitive with regards to battling using your skills, not breeding and using your time.