Let's break this down a bit.
UGC is not a problem. It's UGC and consoles. Consoles are a barrier for UGC orientated games. UGC requires community development participation. Either by groups to create or make sharing easy(Wiimusic failed at both of these). Console are expanding, but part of theproblem is that consoles have been the domain of company created experience not UGC. So there is a lack of UGC orientated people. How can consoles get UGC people. Easy tools, easy sharing easy development and a good fun game.
Malstrom Blog tools started off as user tools created by a need. They were refinded and popularized and the people who started them eventually comercilized the tools. But they were still just user generated objects from PHP/JSP....
Another success is Youtube that the OP uses to share. Youtube is all about sharing. It is the ultimate in video sharing tools. I assure when console start developing not only UGC tools, but the sharing tools creators will come forward. LBP is a great example of an excellent game hindered by user base. Imagine if such a game was on all consoles with a centralized sharing depositry? Malstrom would not be able to complain about LBP at all. This is why UGC has consistenyl worked on the PC. It's open network means that usergenrated sharing tools can be created and has an incredibly sized userbase.
Edit PS:
Silly me I forgot to mention the king of gaming UGC. Never Winter Nights. If any game was a slap to the face on Malstroms anti UGC opinion NWN delivers with a 2x4.
UGC should not be considered a replacement of content, but a way to extend the life of a game. A long life game typiclly sells more and keeps it's legs stronger. That's why DLC will also be another popular alterantive since it will offer after development for longevity of profits.