It's completely dependent on the developer, publisher and game. A lot of developers probably do recognise their games faults but hope they'll be accepted due to the awesome features they've worked on. Othertimes they may feel rushed by the publisher.
What also seems likely is that they get so deep into their work for so long that it becomes very difficult to notice the faults. It's like writing a massive report/essay; you're less likely to see the faults yourself when you read through, but to others it's obvious. Games are obviously far more complex so a lot could go wrong at different stages of development.
This thread makes me think back to when the new Prince of Persia was released. The developers were taken aback by the criticisms of their game and thought not enough was made of the positives and unique stuff they acheived (the relationship with Elika and the lack of loading screens due to not being able to die etc.). They appeared to concentrate on set areas, gotten deep into development and not identified the faults in the game before release resulting in a shock at the average reception from critics.
